Brad’s Note: Today, I am once again passing the reins over to my analyst, Justin Law.
For those reading his work for the first time, Justin has a Ph.D. in Chemistry and has worked in nanomaterials, metal organic compounds, and cancer research.
He is also an avid dividend investor and manages a database of all the companies with the longest dividend growth streaks.
Justin has been with Wide Moat Research from the beginning and has been working behind the scenes to help produce the articles you read here every week at Intelligent Income Daily.
Today, Justin shares a major piece of news that will impact the energy infrastructure space within the United States, and how you can profit from it…
By Justin Law, Analyst, Intelligent Income Daily
Order 2023 is rewriting the rules of the energy game.
The Federal Energy Regulatory Commission (FERC) is in charge of regulating transmission of electricity and transportation of oil and natural gas.
It just approved a new rule – RM22-14, also known as Order 2023. This rule completely changes how new power plants connect to the grid – a process called “interconnection.”
This might sound abstract or niche, but here’s why it’s important…
The interconnection process has been a headache for both renewable energy developers and utilities.
As things are right now, before a power plant can connect to the grid, the utility must do a study to see what impacts it will have. It also needs to determine whether it must build more infrastructure to handle the additional power.
Developers have to wait for years to find out whether their project will be approved and how much it will cost.
And that’s caused massive roadblocks to energy access.
But thanks to Order 2023, that’s all about to change…
Today I want to explain why Order 2023 is so important, why it’s the first step in unleashing a coming wave of new energy infrastructure, and how you can profit from it.
Order 2023: Why It’s So Important
Order 2023 is the first major change to the interconnection process in two decades.
The last time FERC made a big change was in 2003, when it standardized interconnection procedures and agreements.
But developers and utilities started exploiting flaws in the system, leading to the mess we have today.
Under the old rules, interconnection studies were done based on a “first come, first served” process.
Developers submitted lots of speculative interconnection requests just to get a place in line. That meant that lots of projects that wouldn’t make money and had little chance of being built were clogging up the system.
Between 2000 and 2017, less than 25% of interconnection requests across America ended up being built and reaching commercial operations. In some parts of the country that number was as low as 8%.
Order 2023 fixes this by changing interconnection studies to a “first ready, first served” process. This means developers must to show they own the land and have financing for a project before making an interconnection request.
The rule also forces developers to pay deposits for interconnection studies and charges penalties if they cancel their projects. This will reduce the amount of speculative interconnection requests.
Another problem was that interconnection studies could drag on for years. Under the old rules, utilities were only required to make “reasonable efforts” to complete the studies.
Utilities often did studies one at a time. And when a project they had already approved got cancelled, it would force them to redo studies to account for the change.
Combined with the increasing number of speculative requests, this increased the time it took for a project to get approved.
Today, it takes nearly 5 years between making an interconnection request and starting commercial operations.
Order 2023 fixes this by moving to a cluster study process where multiple projects and their impact on the grid are analyzed at the same time. It also adds a deadline for completing studies and charges penalties if they take too long.
This will speed up the interconnection process. That means more power plants can be built. This will help address our increasing demand for more electricity.
And it’s going to bring a flood of new developments and profits to the energy space.
A recent study from the Lawrence Berkeley National Laboratory showed that over 10,000 projects representing over 2,000 gigawatts of electrical generation and storage capacity are currently stuck in interconnection queues.
One gigawatt is enough to power over 700,000 homes.
Order 2023: The First Step to Unleashing New Energy Infrastructure
By rewriting the rules on interconnection, Order 2023 brings the thousands of energy projects currently stuck in limbo one step closer to becoming a reality. We’ll need to triple the amount of electricity we produce if our entire economy switches from running on fossil fuels to electricity.
Getting more power plants connected to the grid is just part of the energy puzzle we need to solve. Another big bottleneck is getting enough transmission lines to safely deliver that power to homes and businesses.
This is a golden opportunity for utility companies to build more transmission infrastructure.
Since most utility company earnings are regulated based on the infrastructure assets they own – and not the amount of electricity they deliver – building large power transmission projects will boost their earnings for years to come.
So, how can you profit from it?
One utility company with a strong history of rewarding shareholders is Eversource Energy (ES). It serves customers in Connecticut, Massachusetts, and New Hampshire.
Eversource has raised its dividend 25 years in a row. That means it’s been through the Great Recession… and the pandemic… and everything else in between while reliably increasing income for its shareholders every year.
Eversource currently yields 4.2%. It trades at less than 15x earnings. That’s the cheapest it’s been in over a decade.
Eversource is the perfect income opportunity play to profit from the roll out of Order 2023. As demand for power and electricity increases, so will your income from this pick.
Analyst, Intelligent Income Daily
P.S. Just like Eversource is a great play to profit from Order 2023’s impact on the energy infrastructure space…
There is another power grid income opportunity. This company – is making massive profits from the success of Amazon and the recent dynamite breakthroughs in the AI space.
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