By Scott F. Mahoney is a private wealth advisor at Morgan Stanley,
August 4, 2017 at 8:25 AM
Changes are afoot in the New Jersey energy sector, possibly meaning new investment opportunities.
At least one area nuclear reactor is scheduled to go offline in two years. While nuclear generated power has long been the state’s primary energy source, in 2015, nuclear energy was supplanted by natural gas for the first time. Together, these two sources of energy account for 90 percent of the power generated in the Garden State.
While at least eight major gas and electric companies compete in New Jersey, with the coming shutdown of a reactor, there will be a power void that must be filled by some other source: perhaps renewable energy. New Jersey holds one of the more aggressive renewable portfolio standards in the U.S., requiring that nearly one quarter of net electricity sales be generated by renewable energy sources, including solar and offshore wind installations, by 2021.
This increasing focus on renewable energy sources statewide parallels a steady drop in production costs nationwide for alternative energy. The cost of generating wind power which ranged from $60 to $100 per mega-watt hour a decade ago in the center of the country, now ranges from $15 to $25 per mega-watt hour, only a fourth of its previous cost.
In fact, wind power has emerged as the cheapest source of energy in middle America, and its total cost presents a striking comparison to the $55 to $65 per mega-watt hour cost for a new natural-gas-fired plant. Similarly, the cost of power generation at large solar facilities has dropped from the $100 to $300 per mega-watt hour range, to a mere $40 to $70 per mega-watt hour now.
Analysts are projecting that by the 2020s, wind and solar will be the cheapest sources of energy generation in some parts of the country. But traditional fossil fuels still will be a significant factor in the overall…