This quote is from a June 14, 2023 article in the Wall Street Journal.
This is an article I wrote for Seeking Alpha 3 years ago. It was denied publication...
I purchased my first Tesla Model S in 2013. I wrote an article about my first 5,000 miles in a Tesla for Yahoo.com. Turns out JB Straub at Tesla saw it and sent me a Tesla Racing jacket, what car company does that?
It was a great vehicle, best I ever owned until 2016. In 2016 I bought a new Tesla Model S. Back in 2013, I was a pioneer, today buying a Tesla is commonplace. When I got my first Tesla I had to adopt certain new behaviors.
First, I had to have a 220-volt outlet installed in my garage so I could charge overnight. That cost about $1,000. I was using the Tesla mobile charger as my full-time charger in the garage but I had many issues with them. So I bought a new wall charger from eMotorwerks JuiceBox Pro for $550. Since then I've been charging fine.
As Warren Buffet says, follow the consumer to the next big investment idea. If other consumers, like me, adopt electric vehicles they will see their weekly gasoline bills migrate to a higher monthly electric bill. I drive 28,000 miles a year. My last ICE vehicle got 28 MPG, so I bought 1,000 gallons of gas a year. My personal economics looked like this:
So, let's say I was paying $50/week for gas or around $2,700 a year for gas. Now plugging in every night I stopped paying $50/week and instead saw my electric bill go up by about $100/month. That's huge! I went from spending $200/month for transportation fuel to $100/month, see below:
The JuiceBox unit is wirelessly connected to my home network so I can schedule charging off-peak and gets lots of data about charging. This is a lot more precise about managing the true cost of electricity used for transportation because it only tracks electricity that flowed through it for Tesla charging. The back-of-the-envelope method would be to compare electric bills before and after but other electricity uses could blur the actual values. For example, after I got my Model 3 in 2013, we put in a new pool and my electric bill went up because of the pool filter, using the Juicebox data is 100% accurate.
Note - some may question my cost per kWh in the above table. My electric bill is as complicated as a cell phone bill. It has various delivery charge components and supply tiers. I just took my total bill for the month, divided by the total kWh used to come up with my all-in kWh rate.
What would happen if millions of people made the same change? Could the country generate an additional 6,000 kWh of electricity per household?
Well, transportation fuel costs would shift from the gas station to the electric company. Just like mine did. So it made me think... Where are EV owners located? What electric companies serve them? Which electric companies have excess capacity? Those utilities can simply make more electricity to meet the demand and drive up profits because they already have the infrastructure. They just need to buy more fuel to make more electricity. What if the EV owners lived in areas where the electric utilities had excess generating capacity? That would mean that over the next decade those electric utilities should see a steady increase in demand with little incremental increase in cost. If such utilities existed would they be good long term investments?
Turns out the answer was not hard to find.
First, where are EV owners located? Not surprising they are concentrated along the West Coast, Mid-Atlantic and Southeast.
Second, what does the generating capacity of the electric utilities in these areas look like?
My first observation is that there isn't much excess generating capacity out West. Perhaps that's why California is so aggressively pursuing distributed solar. Second I see the most reserve capacity is located in the Mid-Atlantic and Southeast. Conveniently located where there is a concentration of EVs. To quote the report, "Southeastern and Mid-Atlantic regions currently have reserve margins well above their region's target level, indicating significant excess capacity." BINGO! That's what I was looking for - lots of excess generating capacity ahead of booming demand for electricity as transportation fuel shifts from gasoline to electricity.
However, the US Energy Information Administration doesn't seem to see this trend. They show energy consumption for transportation growing while residential energy consumption is flat. As more people charge form home residential energy consumption will grow and erode a section of the transportation element, In my opinion. At least that's what happened to me as I transitioned to an electric vehicle.
Finally, the question remains, Who are the utilities in the Mid-Atlantic and Southeast who could benefit from the shift to EVs?
The top 5 holdings in the Utilities Select Sector SPDR (XLU) are:
Duke Energy
Duke Energy (DUK) is based in Charlotte, North Carolina. It owns 58,200 megawatts (or MW) of base-load and peak generation in the United States. It distributes electricity to 7.2 million customers. Duke Energy’s service territory covers 104,000 square miles. It has 250,200 miles of distribution lines. Duke Energy also has more than 4,300 MW of electric generation in Latin America.
👍Lots of capacity and customers, don't love Latin America exposure.
Exelon Corporation
Exelon Corporation (EXC) is an energy producer, trader, and distributor. It operates in 47 states in the U.S. It also operates in Columbia and Canada. Exelon is one of the largest competitive U.S. power generators. It has ~35,000 MW of owned capacity.
👎47 states are too many.
Southern Company
Southern Company (SO) is an electric utility holding company. It’s based in the southern part of the U.S. The company is the 16th largest utility company in the world. It’s the fourth-largest company in the U.S. Through its subsidiaries, SO owns and operates more than 42,000 MW of generation capacity. It serves 4.3 million customers in four states—Alabama, Georgia, Florida, and Mississippi. SO’s regional electric utilities are regulated. They serve a 120,000 square-mile territory with 27,000 miles of distribution lines.
👍Great capacity and concentrated in key states!
NextEra Energy
NextEra Energy (NEE) is North America’s largest owner and operator of wind and solar electricity generating assets. The company has 85 wind facilities in 17 U.S. states and three Canadian provinces. It also co-owns and operates Solar Energy Generating Systems (or SEGS)—the world’s largest solar power generating facility. In addition to wind and solar, NextEra Energy owns and operates generating plants. The plants are powered by natural gas, nuclear fuel, and oil. NextEra’s facilities have a combined capacity of 42,500 MW.
👍Like the Clean Energy assets!
Dominion Resources
Dominion Resources is one of the largest energy producers and transporters in the U.S. It has a portfolio of ~23,600 MW of generation. It has 10,900 miles of natural gas transmission, gathering, and storage pipeline. It also has 6,400 miles of electric transmission lines.
👎Too much NatGas exposure.
So in my first pass I like the following electric utilities, which are best positioned to benefit from the shift to electric transportation from gasoline:
1. Southern Company (SO)
2. NextEra Energy (NEE)
3. Duke (DUK) makes the list because of its generating capacity, geography with a slight deduction for the Latin American exposure.
2023 Note:
In 2021 I added Tesla solar to my home and now I generate 60% of my annual electricity for free from the sun. Maybe that's how we produce the volume of electricity needed, from decentralized solar on homes rather than large centralized power plants.
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