How Utilities Are Capitalizing On Clean Energy

Jerimiah Booream, CFA
August 14, 2020

As the use of clean energy technologies continues to increase, we see electric utilities as a stable investment option that will set the foundation for long-term electrification and decarbonization trends.

Wind, solar, battery storage and other emerging electrification technologies have been growing rapidly for years, and we believe should have several more decades of steady growth ahead. Several companies and industries will capitalize on this trend. However, we view regulated electric utilities as particularly well-positioned to take advantage of this structural shift over the long term. Despite several successful business models emerging to expand the burgeoning clean energy market, traditional electric utilities will likely end up as both the largest owners of clean energy assets and the most important enablers of the transition through expansion and facilitation of the electricity grid.

In addition to serving as the primary growth driver, the clean energy transition also aligns the industry with broader societal goals to decarbonize the economy through electrification made possible by the expansion of renewables. In fact, the power sector has been the most effective decarbonization story of any major source of emissions in the United States. We expect increased efforts from advocates, in combination with improving economics, to shift other sectors towards electrification as well. In particular, the transport and buildings sectors are poised to see an acceleration in this transition next. Despite the substantive decline in emissions over the last decade, many U.S. utility companies have committed to further dramatic reductions, such as an 80% decline from 2005 levels by 2050, demonstrating how much room is left for this trend to run.1

U.S. electric sector emissions show by far the largest declines in recent years 

 

U.S. electric sector emissions show by far the largest declines in recent years

Source: U.S. Energy Information Administration, July 2020.

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Jerimiah Booream is an investment analyst for CIBC Private Wealth Management in Denver. In this role, he works on the firm’s energy infrastructure strategies, with a focus on the intersection between the U.S.-regulated electric utility and alternative energy spaces, as well as opportunities within the broader shift toward clean energy.

1 https://www.eei.org/issuesandpolicy/Pages/CleanEnergy.aspx