Investors on Wall Street are turning their attention away from natural gas and instead beginning to focus on electricity. Shares of gas utility companies have long dominated the market, and been considered sound investments. Well, that is perhaps no longer the case. It seems investor confidence in the future of our fossil fuel dependency has finally reached a tipping point.
How big of an impact are we seeing? Well, for the first time in a decade, the shares in local gas distributors in the U.S. are selling for far less than those of electricity utilities, in relation to their projected earnings. For a side-by-side comparison, S&P's gas utilities index is currently trading at 16.7 while its electric utilities index is trading at 17.1. This might only be a small margin, but given the dominance of the natural gas supply market, it is a significant one. And if you want another, more eyebrow-raising figure, then look at NextEra Energy Inc. This company is the world’s largest investor-owned developer of wind and solar, and is trading at 28 times its projected earnings.
None of this means we are going to wake up in a world tomorrow where nobody uses natural gas anymore. Natural gas remains the primary source of energy in the U.S. since easy-to-source, low-cost alternatives are not widely available. Fracturing gas is still cheap, and gas has even contributed to cutting carbon dioxide emissions by replacing the 'dirty coal' used in power generation. Those within the gas industry point to examples like these for why gas should be a bridge to cleaner energy alternatives instead of being replaced by them.
We aren't quite there yet in terms of widespread renewable energy use, but if the tide is beginning to turn in the U.S. hopefully we will see change elsewhere as well.
