Page 25 - aruba-today-20180825

BUSINESS Saturday 25 auguSt 2018
A25

Utilities pivot from power plants to grid work for profits

By EMERY P. DALESIO American Electric Power
Associated Press plans to invest nearly $18
RALEIGH, N.C. (AP) — Elec- billion in grid improvements
tric utilities are pouring bil- in the next four years, across
lions of dollars into a race to 11 states from Virginia to
prevent terrorists or enemy Oklahoma. AEP said it de-
governments from shutting livered a total shareholder
down the power grid and return of 21 percent in 2017,
everything that depends and the investments will
on electricity in America's help keep profits growing
hyper-connected society. at 5 percent to 7 percent
The U.S. Department of year after year, chairman
Homeland Security de- and chief executive officer
tailed last month how Rus- Nicholas Akins said.
sian hackers have targeted Charlotte-based Duke En-
the nation's energy grid. Of- ergy plans to invest $25 bil-
ficials said they could have lion on grid improvements
caused major blackouts, over the next decade
but instead, the hackers across its territories in the
appeared more focused Carolinas, Florida, Ohio,
on reconnaissance. Kentucky and Indiana.
The concern over cyber- Utilities won't say exactly
threats comes as power how they plan to thwart
companies shift focus to hackers, but their defens-
pursue extensive upgrades es partly include installing
in software, switches and more "smart-grid" commu-
wires to enable a much nication technology across
more flexible distribution of the network, such as re-
electricity. mote sensors and transmis-
That means the likelihood sion equipment that can
of rate increases for con- In this photo taken Tuesday, Aug. 14, 2018 power transmission lines deliver electricity along the better detect suspicious
sumers. Utilities have long Interstates 40 and I-85 corridor in Orange County near Hillsborough, N.C. activity and automatically
based their business on Associated Press reroute power around out-
building power plants and ages, Duke Energy said.
selling the juice to custom- trol and convenience, and age transmission equip- More than three dozen Duke Energy already is
ers, adding a regulator- cyber and physical secu- ment. Now it has to be regulated electric compa- collecting grid modern-
approved profit margin to rity enhancements while updated to accommo- nies last year devoted al- ization charges in Florida,
pay for it all. But the need creating thousands of jobs date renewable energy most half their more than Ohio and Indiana. But
for big generation projects and supporting the state's that can surge and flow in $120 billion in total capital North Carolina regulators
has fallen after decades of economy," Duke Energy many directions, be stored spending to grid improve- this year wouldn't approve
energy conservation, fewer CEO Lynn Good told Wall in massive batteries and ments, according to the the company's proposal to
factories and the swapping Street analysts this month. even move in reverse as Edison Electric Institute, the start charging the average
of coal-fired power plants Her spokesman declined solar-equipped homes and trade association for inves- household an extra $3,000
for cheaper and cleaner- an interview request. businesses sell their excess tor-owned utilities. Spend- to $4,000 over the coming
burning natural gas. The message that big power. ing on new power plants decade to bury power lines
So electricity compa- spending is needed is am- Key pieces of equipment, fell to less than a third of the and modernize electricity
nies are telling Wall Street plified by U.S. government such as transformers and total, the trade group said, delivery systems.
they're shifting their busi- warnings of dire conse- transmission wires, are 25 as electricity demand de- Good has told analysts
ness plans. Now they're quences if the grid isn't re- years or older. And hack- creased to its lowest since Duke Energy can deliver
having customers pay to fashioned to make it tough- ers aren't the only threat: Recession-marred 2009. profit growth of around
replace aging equipment, er to black out and easier to The power supply must be Some of the fastest-grow- 6 percent a year if state
block malicious hackers, restore. The Department of protected against physi- ing utilities over the past regulators approve the
minimize outages, accom- Energy's latest cybersecu- cal attacks, from criminals decade, including Ameri- spending and associated
modate the upsurge of rity plan, a National Acad- shooting out transform- can Electric Power, Cali- profit margins the com-
wind and solar power and emy of Sciences report last ers to severe weather and fornia's Edison International pany wants on grid invest-
allow consumers more con- year and advocacy groups even solar storms. and Florida's NextEra En- ments. That compares to
trol over when and how like Protect Our Power are "Old infrastructure needs ergy, are the same ones an average annual return
much power they use. among the voices calling to be replaced. It's that that led the way into grid of 8.3 percent over the past
The investment research for sustained federal sup- simple. And that's terrific upgrades, said Eric Selmon decade for companies on
firm SSR projects that in- port for grid improvements. for the industry, because of SSR. Profits over the next the S&P 500 Index. Includ-
creased investment in the Congress created grants companies do earn a very decade will hinge on in- ing stockholder dividends,
distribution grid will be the for "smart grid" investments competitive rate of return creased investment in up- Duke Energy's return should
primary source of growth a decade ago, but hasn't on new investment and so dating and modernizing be more like a steady 8-10
for most utilities over the appropriated funds for there's a reason to invest," the distribution grid, Selmon percent a year, the com-
next five to 10 years. Those them since the 2009 stimu- said Ronald Silvestri, man- said. pany is telling investors.
investments mean a stream lus package. aging director of global "We're at the early stages "I see over the next de-
of new revenue that could "The grid" was essentially equity research at invest- of infrastructure modern- cade more investment in
last decades. built to carry electricity in ment management firm ization. It's a multi-decade the grid, relatively, than
"This infrastructure will pro- one direction, from power Neuberger Berman. "This theme that I believe is be- any other part of the sup-
vide significant benefits to plants to homes and busi- gives the sector a very long ing vastly underappreci- ply chain of electricity,"
our customers, including nesses over a network of tail of attractive growth for ated," Silvestri said. Good said in June at a talk
improved customer con- poles, wires and high-volt- many years." Columbus, Ohio-based in Washington.q