The domestic market offers stagnant near-term growth and nominal long-term growth. The international markets offer great potential for U.S.-based electric companies. The demand for energy in emerging markets across the globe is rising. There are power and utility companies that aren’t geographically restricted by regulation. For these companies, the potential benefits of diversification across fast-growing markets are huge. However, local knowledge and adaptability are required.
Duke Energy (DUK) has 12% of its earnings come from selling electricity internationally. DUK’s competitors like Southern Company (SO), Dominion Resources (D), and NextEra Energy (NEE) should expand to the international market in order to grow. The Utilities Select Sector SPDR (XLU) focuses on each of these companies.
The power sector is regulated in most of the countries in the world. Entering new markets isn’t easy. Utilities should engage with local governments in long-term strategic partnership models to access these markets.
The U.S. Energy Information Administration (or EIA) forecasts that in the next 25 years, Organization for Economic Co-operation and Development (or OECD) nations—largely comprised of developed nations—will fail to match the non-OECD countries in terms of generating electricity. More emerging nations will become hungry for power.
Electric vehicle market
Another key opportunity for the electric utility industry lies in the development of the electric vehicle market in the U.S. Electric vehicles are becoming cheaper and more powerful. They run for longer distances in a single charge. The vehicles are requiring more electricity and power substation. This creates an opportunity for the industry.