Services sector prospects in the New Carbon World
The new world will have a carbon effect on the outlook for the public service sector. Electric utilities are facing new challenges as they adapt to the environmental initiatives the new administration and Congress. About 56% of the electricity produced in the United States comes from coal, a major contributor to carbon emissions. Natural gas generates about 27% of electricity, wind power generates about 1% and solar power generation around 0.1% of the electricity used in the United States. The cost to reduce carbon emissions will impact significantly to the utility sector and related industries.
Political change
The transition to a market economy to one that is politically controlled long-term consequences will be for the U.S. economy and specific industries. The 110th Congress produced six Carbon Cap and exchange, which could not pass through a policy in the capital. Now that the 111th Congress is in session, the change in the composition of Washington politics that may affect the operations that produce carbon industries, especially utilities.
President Obama has continued to support his campaign promise to take steps to reduce carbon emissions. In a realignment of the direction of the Committee on House of Representatives, John Dingell (D. Michigan) was replaced by Rep. Henry Waxman (D. CA) as chairman of the House Energy and Commerce. Michigan Representative Dingall has been a longtime ally of the automobile manufacturers and has favored a slower approach to reduce carbon emissions. His bill requires the most recent of total carbon emissions to 6% below the levels 2005 2020.
Representative Waxman favors a more dynamic approach that seeks the reduction of 14% of 2005 levels by 2020. Now he is president of the Commission that produced the bill in the House, it is likely that the bill will be tabled in the House will be much closer to what he preferred. Of the representatives of the coal-producing states are unlikely to support measures that are more aggressive. However, Representative Waxman, is supported other powerful members of the House, including Speaker of the House Nancy Pelosi (D. California). Speaker Pelosi is known for keeping his place in line and trying to exploit their power restored.
The Senate has a slightly different situation where the Democrats have increased their majority. However, Republicans still have at least 41 seats, enough to block the initiatives of the Democratic majority. Of course, some Republicans voting with Democrats in May, if the parties not always work as expected. A Senate bill is likely to have low carbon objectives of the House version, creating a fight which will become the final version. Once again, the senators from states that have a major impact on the U.S. economy will influence the result.
The change of guard in Washington is the application of a new political situation which would have a long-term services industry. Special interests and pressure groups seeking to influence the outcome. Meanwhile, investors should try to understand how to proceed in this new environment.
Impact of Carbon caps in the services sector
Assuming that the more restrictive rules on carbon emissions becomes law, the winners of this battle will be which are capable of producing most of its low power consumption of carbon or carbon-free sources. Consider renewable energy and nuclear power plants. The losers are the public services that the fuel-intensive carbon energy generation, namely coal.
Of course, the solar wind and businesses continue to benefit. Wilderhill Powershares Clean Energy ETF (PBW) has a wide exposure to clean energy technologies. Xcel Energy (XEL) has pledged to reach 20% of its electricity from wind. Your Windsource and Renewable Energy Trust was the first in the number of clients and the fifth Energy sales in 5000 U.S. Public services by the National Renewable Energy Laboratory. Florida Power and Light (FPL) is the largest retailer U.S. wind power.
Wind energy has been a much bigger success in Europe, where Denmark, Germany and Spain are important. In Spain, have occurred up to 40.8% of the total demand for electricity from wind turbines. Vestas (VWSYF.PK) is the leading global wind turbine manufacturer based in Denmark with NEG Micon (NEGMF.PK) and bonus (BONU.CO). These commercial enterprises in the Copenhagen Stock Exchange. The market for wind energy in Germany is by far the most the world's largest and includes Enercon (ENDC.PK) and Nordea (NRDXF.PK). None of the shares of these companies listed on U.S. stock exchanges.
Some analysts say incentives against wind power in the United States become a challenge for domestic and foreign firms to operate in this country. However, Gamesa (GAM.MC) is expanding beyond its home market in Spain and entered the U.S. market. The first energy Trust ISE Global Wind ETF (FAN) is a new ETF that specializes in wind power. Sixteen percent of funds allocated to U.S. companies with complementary Denmark, Germany, Spain and the UK. For example, REpowersystems AG represents 10.51% of the funds of funds, while 10.28% is Vestas and Gamesa is 8.81%. This fund is a way for U.S. investors to participate in the worldwide wind pure plays.
In the U.S., companies that trade in the securities markets are GE and Siemens (SI) are the main producers of wind turbines. The problem is that the big corporations are diversified, so that the impact of wind energy will be minimal performance for investors. ABB Ltd. (ABB) is a Swiss company involved in the distribution of electricity and building networks where they are dominant. Upgrade to the U.S. power grid and other countries will be a major focus for countries seeking to invest in its infrastructure.
Other U.S. companies to benefit from growth in energy wind, including American Superconductor Corporation (AMSC), which supplies components for the power grid and wind generation of electricity. The wind other companies on the basis of the creation of companies traded on the over-the-counter market bulletin consulting market. Some will be winners and the other disappear.
Proponents of wind power believe that America can reach 20% of the total production capacity in 2030. The problem is that electricity demand should continue to grow. This means that there will always be a need for new sources of electricity. Therefore, nuclear energy can also see a renewed interest, despite decades of a long absence of new nuclear plants in the U.S. nuclear power has zero carbon emissions directly. In this case Excelon (EXC), the largest producer of nuclear energy to see my new interest. Excelon aims to reduce, offset or move tons over 15 million metric emission of greenhouse gases to 2020. They explore the construction of new nuclear power stations with a maximum capacity of 3,040 MW.
Speaking of construction companies with experience in designing nuclear power plants and construction should also benefit. McDermott (MDR), was built of large boilers and power generation components, and are one of them if Primary Contractors services the U.S. government nuclear. Fluor Corporation (FLR) has extensive experience in the design and construction that could benefit a new interest in nuclear energy production.
Utilities that the use of natural gas also should do well. Natural gas is to reduce carbon emissions than coal and oil, but higher than the wind and energy nuclear. In addition, there are currently a lot of excess supply available and other sources has not yet been drilled. The iShares Dow Jones U.S. Oil & Gas E & P Fund (IEO) has significant exposure to natural gas producers.
Washington should adopt less stringent restrictions on carbon emissions, then there less than one winner and losers. Although this is unlikely in the current political climate is something to consider.
The losers in a carbon-capped parameters companies will depend on how each state regulatory agency addresses carbon costs. If regulators allow the companies to raise rates of customers to pay higher costs, utilities should not be affected. Moreover, if the authorities are reluctant to allow companies to pass on higher costs then public services could suffer. Utilities such as Allegheny Power (AYE), American Electric Power (AEP) and Dayton Power & Light (DPL) may experience decreased income.
The Bottom Line
Economic policy and in particular, the transition to carbon-Caps will have a significant impact on the sector of distribution services and suppliers. If, as expected, the government is more strict emission and carbon trading legislation, some public services will benefit and others suffer. Furthermore, influence policies to encourage investment in various alternative energy companies, especially wind power generation. The most prudent approach is to purchase public services that benefit from new emission standards and avoid those that are highly dependent on coal production capacity.
The more aggressive investors who are looking to invest in companies where the winds are tested. So far, the most successful businesses are based in Europe. U.S. Investors can participate in the base of these companies through ETFs that invest in these companies. In the U.S., there are a number of new companies that have yet to demonstrate its proven implementation experience. This makes them a riskier alternative.
The sector public services is about to undergo a major transformation will be the winners and losers. Investors should be aware of the characteristics of each company so they can invest accordingly. It is a time of greater opportunity and greater risk.
About the Author
Principle: Hans E. Wagner, CEO of Trading Online Markets LLC and Peregrine Advisors LLC
I began investing in high school and have remained active in the markets. A graduate of the US Air Force Academy with an MBA majoring in Finance from the University of Colorado, I continued to invest throughout my career in the US Air Force, Bank of America, Coopers & Lybrand, and working for Ross Perot before retiring at 55. During that time I have gained a very good understanding of what works and what doesn't. I hope to impart that knowledge to others, so they can achieve financial independence as well.
Hunting Down The "Kundun" in Kalima
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