US energy opportunities go beyond shale

Retirement of coal plants, increased gas production and renewables’ intermittency issues offer plenty of avenues for investors to dig into, reckons Partners Group.

Opportunities in US energy over the past decade have largely stemmed from the shale revolution that has taken the country by storm and transformed the country – formerly a big importer of the black stuff – into a major oil exporter.

But other developments in the sector also present opportunities for investors, Switzerland-based Partners Group points out in a report released this week.

The significant fall in commodity prices, the substantial ramp-up in natural gas production and more stringent environmental regulations are some of the trends leading to a rapid displacement of coal power generation in the US power market, it says.

“The US Energy Information Administration predicts around 60 gigawatts of cumulative coal retirements by 2020 across the United States, requiring significant replacement capacity even without demand growth,” Partners Group wrote. “The coal retirements represent an opportunity to acquire and develop replacement assets both in the gas-fired and renewable generation space.”

The firm states that the shift in gas-fired power, for example, presents opportunities in the midstream segment in terms of gathering, processing, transportation and storage infrastructure. 

In terms of renewable energy, conventional power assets are needed to address the intermittency issues renewable resources face. According to Partners, the requirement for flexible generation capacities to ensure grid reliability places a premium on assets that can be flexible in their operation.

An example is the Sentinel Energy Centre, an 800-megawatt simple-cycle, natural-gas fired facility the Swiss firm invested in last November with the acquisition of a 25 percent stake. Sentinel can start and stop on demand in response to fluctuations in supply from renewable electricity sources; it is also able to reach full capacity in less than 10 minutes, enabling electric utilities to maintain grid stability.

Telecoms is another sector Partners favours, both in the US and Europe. In North America, strong growth in broadband demand and policy support are creating tailwinds as carriers shift from owning the infrastructure to purchasing capacity. In Europe, meanwhile, relatively low penetration of fast broadband along with strong policy support “invite substantial investment in the sector.”