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Dominion Unit Buys Solar Projects, Ramps Up Clean Generation

Zacks Equity Research

Dominion Energy D announced that its unit Dominion Generation has acquired two solar generating projects from Savion LLC, a subsidiary of Macquarie's Green Investment Group. These units, which will have a combined clean power generation capacity of 95 megawatts (MW), are expected to be operational from 2020.

The green energy generated from these sites will be sold to T-Mobile USA, Inc. TMUS under long-term contracts. Hence, these acquired assets — on the onset of commercial operations — will contribute to Dominion’s earnings.

Utilities Focusing on Emission Cut

Dominion has set targets to cut carbon emissions by 55% and 80% in 2030 and 2050, respectively, from 2005 levels. The company has plans to add nearly 5,000 MW of wind or solar generation by 2028. The latest acquisitions will help Dominion to meet this target.

In addition, NextEra Energy NEE has made plans to add nearly 11,500-18,500 MW of clean energy sources in its production portfolio within the 2019-2022 time period under its Energy Resources segment. Through the Florida Power & Light Company unit, the company aims to add 30 million solar panels in Florida by 2030, under its “30-by-30” plan. All these initiatives will help NextEra Energy to reduce carbon dioxide emission rate by 67% within 2025, compared with 2005 levels.

Another utility Xcel Energy XEL is aggressively cutting down the usage of coal in electricity generation and replacing the same with renewable sources. The company aims to cut emissions by 80% and 100% within 2030 and 2050, respectively, from 2005 levels.

Notably, other operators in the space are setting up generation units that are focused on creating energy from renewable sources. With technology development and a decline in costs, clean sources like geothermal and offshore wind generation are gradually becoming popular among utilities.

EIA Emission Forecasts

The U.S. Energy Information Administration (“EIA”) in its recent release predicted energy-related carbon dioxide (CO2) emissions to decline 2.5% in 2019 and 1.0% in 2020 against 2.7% increase in 2018. The decline in carbon emissions could be attributed to efforts of the utilities, which are setting targets to further cut emissions over the long term.

The primary reason behind declining carbon emissions from electricity generation is increasing usage of natural gas, renewable and other clean sources to generate electricity. EIA also forecast that the total U.S. utility-scale electricity generation from natural gas-fired power plants will rise from 34% in 2018 to 37% and 38% in 2019 and 2020, respectively. Usage of coal is expected to drop from 28% in 2018 to 25% in 2019 and further to 22% in 2020. Per EIA, contribution from renewable sources will be 17% in 2019 and increase to 19% in 2020.

Zacks Rank & Price Performance

Dominion currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

In the past 12 months, shares of Dominion have gained 16.8% compared with the industry’s 18.1% rally.

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Dominion Energy Inc. (D) : Free Stock Analysis Report
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