Income Insights

Kentucky regulators’ decision to oppose Algonquin Power & Utilities (TSX: AQN, NYSE: AQN)'s deal to buy American Electric Power’s (NYSE: AEP) Kentucky Power and Kentucky Transco units is likely to put a chill on prospective utility M&A in the state.

Last weekend, a Wall Street Journal editorial pointed out the cost of “balancing the grid” added GBP150 to UK household electricity bills in 2022. The authors’ attempt to blame the entire cost on adoption of renewable energy is quite a stretch, as it ignores the larger role of erratic weather and availability of other power plants.

Their broader point that wind and solar are still challenged by intermittency, however, is spot on.

Southern Company (NYSE: SO) has deflated investor hopes yet again, announcing it would postpone the startup of the first of two nuclear reactors under construction at the Vogtle site in Georgia.

Later this year, the 800-megawatt capacity Vineyard Wind 1 project will begin delivering electricity to the Massachusetts grid. After that, however, the way ahead for US offshore wind is considerably less clear.

The worst mistake investors will make this year won’t be getting caught with a stock on the heels of a disappointing earnings report, misjudging the Federal Reserve’s resolve fighting inflation—or the rising risk of a recession.

Communications is a growing and essential service. And a new generation of 5G and eventually 6G wireless—augmented by fiber broadband networks—is on the cusp of spurring a global revolution in productivity.

So long as the Federal Reserve is on the warpath against inflation, risk of recession will be elevated. And that tilts the odds heavily in favor of lower stock prices over the next few months. The utility stock rally we’ve seen since the October issue of CUI posted, however, is proof positive that the trends powering sector outperformance this year are entrenched as ever.

The California Air Resources Board voted to ban sales of gasoline-powered vehicles by 2035, and targets minimum electric vehicle market share of 35 percent by 2026 and 68 percent by 2030. And 17 other states will likely follow suit.

Is Inflation Reduction Act enough to get carbon capture off the ground? Historically, it’s been foolish to bet against innovation when there’s enough money behind it. And in this case, the US government’s largesse is very much leaning into a major investment trend in the private sector

In the previous decade, NextEra Energy’s (NYSE: NEE) ability to convert renewable energy deployment into earnings depended squarely on regulatory support and subsidy. Now, the combination of falling production costs and soaring natural gas prices has made wind, solar and storage increasingly attractive from a cost-cutting standpoint as well.