The value of power transactions reached a record $241.8 billion globally in the third quarter of this year, according to Ernst & Young’s Power Transactions and Trends: Q3 2018 report released Monday.
Deals reached a value of $28.8 billion in the U.S., a 7% increase from the second quarter, driven largely by growing investments in natural gas and renewables. Utilities in the U.S. purchased $4.5 billion of renewable energy assets in the third quarter, including Sempra's $1.54 billion sale to Consolidated Edison.
Investments in gas utilities reached a record level as well, with $36.5 billion in global transactions. Over half those deals, $18.3 billion, were made in U.S. markets. The largest deal in the sector was a $16.3 billion acquisition of APA group, a natural gas and electricity company in Australia, by the Chinese company Cheung Kong Infrastructure.
Renewable energy purchases in the U.S. were noted to be largely driven by "state- and local-level policies and incentives [that] push renewable growth despite federal advocacy for conventional generation," according to the report.
New technology, particularly electric vehicle (EV) infrastructure, is anticipated to continue driving power investments from a variety of participants, including transportation, oil and utility companies. The third quarter saw Michigan utilities DTE Energy and Consumers Energy invest $30 million in EV charging programs. Duke Energy Florida announced the rollout of 530 charging stations across the state and Xcel and Duke have plans to invest a combined $35 million in EV infrastructure across Minnesota and South Carolina, respectively.
Sempra announced its ConEd deal in June, selling 980 MW of installed capacity, including wind, solar, natural gas and battery storage assets, part of an attempt to optimize its portfolio, the utility said.
The deal "highlights the impact of ongoing shareholder activism in the region," said Miles Huq, Ernst & Young Global power & utilities transactions leader, in the report.
Storage and wind are expected to continue growth, though wind investments will likely stagnate after the federal production tax credit declines by 60% in 2019. Before then, New York is soliciting bids for 800 MW of offshore wind and Apex Clean Energy is building two wind facilities totaling 800 MW in Texas.
Corporate power purchase agreements continued to be a large driver of renewable energy growth in the U.S., projected to reach a record 10 GW by the end of 2018, Bloomberg BNEF analyst Kyle Harrison told Utility Dive in August.
The top five deals of the third quarter include:
- Enbridge buying Spectra for $28 billion
- Sempra selling $1.54 billion of power resource assets to ConEd
- Nextera buying a 1.4 GW portfolio of 11 wind projects for $1.3 billion
- Dominion selling three power plants for $1.3 billion
- Macquarie Infrastructure Corp. selling its 644 MW gas-fired Bayonne Energy Center for $900 million.
Although total electric generation in the U.S. is up 5%, the region saw a 6% drop in coal-fired electric generation in the third quarter and a 17% increase in gas-fired power. However, the report noted, the end of the quarter also saw President Donald Trump nominate Bernard McNamee, who is "considered a proponent of conventional generation," to the Federal Energy Regulatory Committee.
Correction: An earlier version of this article incorrectly named the company Enbridge purchased. Enbridge bought Spectra, not Sempra.