It is becoming increasingly apparent that the U.S. is in danger of not having enough electricity. A number of electric-grid operators have warned that power generating capacity is struggling to keep up with demand. This could lead to rolling blackouts during peak periods.
There are a number of reasons for the increasing gap between generating capacity and demand. On the supply side, some of the problem can be attributed to the phasing out of aging coal- and gas-fired power plants. While there have been calls for delaying some closures, there have also been efforts by some states to accelerate fossil fuel plant closings by adopting aggressive goals for wind and solar.
Despite capacity issues, there is a continuing regulatory effort to shift home heating and cooking to electricity and to support some quite aggressive targets for electric vehicle (EV) production.
By now it should be abundantly clear that the transition to green energy is going to be very expensive and take longer than many had hoped. See our blog of May 20, 2022 “The Electric Utility Dilemma.”
Investors may find some attractive opportunities related to increasing electric generating capacity, but should be careful in assessing returns on investment as consumers and energy intensive businesses grapple with higher prices and supply constraints.
All comments and suggestions are welcome.
Walter J. Kirchberger, CFA