The push into solar and alternative energy will help reduce our reliance on fossil fuels, but as we go green, the energy-efficiency programs could weigh on utility sector stocks and exchange traded funds.
According to Fitch Ratings analysts, alternative energy programs will cut into utility revenues and profit margins and discourage investments in to new transmission projects in five years, reports Christopher martin for Bloomberg. [Solar ETFs Shine As China Expands Capacity]
Glen Grabelsky, Fitch’s managing director of utilities, power & gas, singles out Midwest and Northeast utility markets that could face increased competition as businesses and homeowners install their own generators or upgrade to more efficient systems.
Moreover, favorable alternative energy subsidies is cutting into utilities’ profits. For instance, regulators in 43 states require utilities to acquire surplus power produced from solar panels. Grabelsky believes that state regulators could eventually allow utilities to shift some of the burden onto customers who aren’t using solar sources.
“You can only burden the other customers to a certain degree,” Grabelsky said in the article. “For now it’s fairly negligible but in five years it will become noticeable. Each year the disparity will grow.”
Over the past year, power supplied by U.S. utilities decreased 3.4%, mostly due to energy efficient programs and solar generation. Grabelsky warns that if this continues, utilities won’t be able to invest in new projects or upgrade transmission systems.