Analysis: Without demand growth companies get creative

After reviewing a slew of conference CEO presentations and financial filings by electric generation owners in recent weeks, a few trends emerge from the chatter.

First off, electric demand is flat. Wisconsin Energy (NYSE:WEC) Chairman and CEO Gale Klappa said recently the industry is facing an era “of almost zero kilowatt hour sales growth.”

Other executives have made similar statements lately.

There are various reasons for this, including economic uncertainty, energy efficiency and mild weather. Some large companies have also tapped their own renewable or gas-fired generation to partially “unplug from the grid” as a Sept. 17 Wall Street Journal article put it.

As a result, it looks like generation owners are trying to find demand in non-traditional places. Two areas of increasing interest are electric vehicles (EVs) and data centers.

It’s increasingly common for financial filings or CEO presentations in the power sector to include at least a mention of electric vehicles.

Both regulated utilities and competitive power generators are looking to tap the nascent market in charging stations for electric transportation. NRG Energy (NYSE:NRG), which has been active on electric car growth, has said electric vehicles won’t strain the grid much more than Starbucks.

EV interest also extends north of the border. A group of New England governors and Eastern Canadian premiers recently approved a plan to encourage charging stations.

Although thousands of plug-in vehicles have been registered in the Pacific Northwest, neither Puget Sound Energy (PSE) nor Portland General Electric (NYSE:POR) has reported additional stress on the grid.

In addition to transporting people with EVs, power companies are also seeking to tap potential business generated from moving and storing information.

Various technology companies are building new data centers. Companies like web search giant Google (NASDAQ:GOOG) are building more new data centers. Power companies like Duke Energy (NYSE:DUK) and Dominion Energy (NYSE:D) are increasingly trying to attract such centers.

Dominion says it already serves more than six million square feet of data center facilities in Virginia, which has a low rate of transmission outages. Dominion also stresses its high number of technology workers in Virginia and its carbon emissions compared to the industry median.

Duke, for example, provides an Internet page with a map of potential data center sites in much of its service territory.

Meanwhile, there is the more traditional electric utility role of working with their service territories to recruit manufacturing plants. American Electric Power (NYSE:AEP), Duke, Entergy (NYSE:ETR), NextEra Energy (NYSE:NEE), Southern (NYSE:SO) and Tennessee Valley Authority (TVA) are just a few generators that tout their economic development efforts in their service areas.

In September, for example, Duke announced it had chosen various properties to be part of North Carolina’s 2013 Site Readiness Program to prepare the location for potential industrial development.

It’s part of the continuing power sector effort to avoid zero demand growth.

 

About Wayne Barber 4201 Articles
Wayne Barber, Chief Analyst for the GenerationHub, has been covering power generation, energy and natural resources issues at national publications for more than 20 years. Prior to joining PennWell he was editor of Generation Markets Week at SNL Financial for nine years. He has also worked as a business journalist at both McGraw-Hill and Financial Times Energy. Wayne also worked as a newspaper reporter for several years. During his career has visited nuclear reactors and coal mines as well as coal and natural gas power plants. Wayne can be reached at wayneb@pennwell.com.