First Research US Industry Profile

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Electric Utilities
SIC Codes: 4911
NAICS Codes: 2211
Last Quarterly Update: 7/18/2022
Companies in this industry generate, transmit, and distribute electric power. Major companies include Duke Energy, Exelon, and Southern Company (all based in the US), as well as EDF (France), Enel (Italy), EON (Germany), and TEPCO (Japan).
The global electricity industry generated more than 25,000 terawatt hours (TWh) of electricity in 2020, according to Ener Data. Leading countries in electricity generation include China, the US, India, Russia, and Japan. Power generation declined globally due to lower electricity demand in 2020 driven by the COVID-19 pandemic.
The US electric utilities industry includes about 11,500 establishments (single-location companies and units of multi-location companies) with combined annual revenue of about $460 billion.
Competitive Landscape
Although deregulation has altered power markets in many nations, electric utilities often continue to operate as unofficial monopolies in a given service territory. A growing number of countries have deregulated or are moving to deregulate their energy markets, including Australia, Canada, France, Germany, Japan, India, Italy, Portugal, Russia, Spain, the UK, and the US. The intended purpose of moving toward a less-regulated electricity market is to decrease the cost of electricity by fostering competition among producers. One practical effect is the divestment of generation facilities by many investor-owned and government-owned utilities.
Profitability in the electric utility industry is determined by government regulations and fuel costs. Large companies have an advantage in negotiating fuel contracts. Small companies can compete effectively by exploiting market niches, such as offering green power in regulated markets.
In the US, the electricity industry for many years consisted of investor-owned utilities, municipal utilities, cooperatives, and government entities that owned the generation, transmission, and retail distribution facilities within a limited area and served all customers within that area as tightly regulated "natural monopolies." Though "natural monopolies" still exist, the electric energy industry in the US underwent a restructuring driven by changes in federal and state laws in the 1990s. In restructured (or deregulated) markets, generation, transmission, and distribution operations are carried out by separate companies, and the owners of local distribution lines make their lines available to competitors.
Despite the popularity of restructuring activities initially, only about 20 states have deregulated their electricity industries, according to Chariot Energy. Many local electricity distributors are still owned by utility holding companies that also own power generation facilities, wholesale transmission lines, and wholesale power trading companies. The US electric utility industry is concentrated: the 50 largest companies generate about 80% of industry revenue.
Competitive Advantages
Investment in Renewables - Utilities are setting ambitious goals to incorporate more renewable energy sources into power generation portfolios. Companies that invested early and developed expertise in wind and solar facilities are reaping rewards as costs decline and demand grows from customers and government agencies seeking to cut greenhouse gas emissions. Global spending on new renewable power capacity totals about $300 billion annually, making it a top area of worldwide electricity investment, according to the International Energy Agency (IEA).
Upgrading Infrastructure - In emerging economies, capital requirements for new power lines are high as demand for electricity skyrockets. In developed nations, companies must invest heavily in infrastructure upgrades and expansions to support new renewable generation assets and replace aging equipment. Smart grid investments help lower costs by improving reliability and efficiency. Government and commercial spending on power networks worldwide totals about $300 billion per year.
Strategic Marketing - In competitive markets, electricity generators and marketers gain the biggest advantage by offering lower rates. Companies may also cater to consumers who prefer to buy energy that comes from renewable sources such as wind and solar plants. Utilities may also offer special energy conservation or supply management services to commercial clients.
Companies to Watch
One of the largest utilities in the US, Duke Energy serves more than 9 million power and gas customers. The company has set goals to increase renewables from 4% to 9% of its power mix over the next 10 years, as well as to invest $11 billion in cleaner generation sources, including natural gas, to reduce use of coal. The utility is also investing heavily in grid modernization efforts.
NextEra is one of the world's largest generators of renewable energy, with about 20,000 MW from wind and solar power plants. The company operates in the US, Canada, and Spain and has energy marketing operations. NextEra plans to build between 10,000 MW and 16,500 MW of wind and solar projects between 2017 and 2020.
Enel delivers electricity and gas to 64 million customers in 35 countries, primarily in Europe and the Americas. Enel is investing heavily in alternative energy sources and in modernizing its grid network. The utility is working to improve digitization and distribution mobility by implementing smart grids, digital meters, EV charging stations, and remote connectivity systems.
Products, Operations & Technology
Major services include electric power generation, transmission, and distribution. Electric power generation accounts for about 30% of US industry revenue ... plus:
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