Oil and Gas Glut Continues – 12/25/15

As the oil and gas glut continues, commodity-linked companies that offered dividends to investors seeking consistent income must choose whether to cut back or risk lower cash reserves in a persistent rout. With stock prices in sharp decline and large debt burdens throughout the industry, dividend cuts would allow the companies to preserve capital in a time when bankruptcy is a clear danger but might also scare off investors in a time when their money is needed most. Unfortunately for the companies, pushes for increased fuel efficiency, pessimistic markets, and weak OPEC influence on prices suggest the oil and gas glut will continue. Many companies are preparing their budgets for the lower price market with write-downs becoming more common as other options dry up.

Hawaii has become the solar energy testing ground of the US. Unsurprisingly, solar has done well in the isolated and sunny state which has led to an interesting case study in solar and energy storage. Since the existing net energy metering tariff allowed homeowners to sell unused solar energy at the rate they would be charged to buy from a utility and retail rates are high in Hawaii, solar homes saved significant amounts in electricity costs. With the newer legislation, homeowners choose between self-supply, grid-supply at a reduced rate, and time-of-use rates. Storage is required to meet benefit level provided under the old system increasing the cost to home owners but adding an incentive to lower storage costs and increasing grid reliability as in-home battery systems smooth electricity usage.

Other issues in the news:

In distributed energy generation – Net-metering compensation is facing opposition as utilities see payments canceling income from electric bill, connection fees for grid access remain a touchy issue since home owners pay nothing into maintenance of the system they use to sell back electricity, and feed-in tariffs may see drop offs with the approach of grid parity as renewables become more economically competitive with oil and gas.

In Japan – Since the Fukushima disaster, Japan has been reluctant to embrace nuclear power again and, as a result, some of its cities have taken interest in other renewable energy sources. Though the country depends upon imports for almost all of its needs, the desire for self-sufficiency have led Japan to mimic the German system where municipal utilities took a greater role in production having a significant impact on traditional suppliers.

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