Renewable Energy 'Comes of Scale'

Renewable energy adoption appears to be gaining momentum. Recent events suggest that solar and wind power technology has reached an inflection point  -  inescapable, irreversible scale.  In the last few weeks three technology giants announced plans for major investments in solar and wind power sources.   

Microsoft  (MSFT:  Nasdaq) announced its intention to  purchase all power generated by an onshore wind farm planned in Wieringermeer Polder near Amsterdam.  An existing wind farm will be expanded by N.V. Nuon Energy, a utility company that is part of the Vattenfall group.  Nuon expects to bring the full 180-watt wind farm on-line by the end of 2019.  It will be one of the largest wind farms in Europe.  One of Microsoft’s datacenters is adjacent to the wind farm, making it a ‘natural’ customer.

No neophyte to renewable energy Amazon (AMZN:  Nasdaq) already has the kilowatts coming down the line from wind power.  The company has a total of 18 wind and solar projects in the U.S. alone.  In October 2017, the company started taking electricity from its largest wind farm investment so far.  The Amazon Wind Farm in Scurry County, Texas has 100 turbines and the capacity to produce one million megawatt hours each year.  Amazon has agreed to purchase 90% of the power production.  The rest of the energy will be sold into the Texas electricity power grid by the wind farm operator, Lincoln Clean Energy (private). 

Amazon is not taking a break at this point.  Another 35 wind and solar power projects are in the planning stage.  The company has declared intentions to achieve 100% renewable energy for its entire global infrastructure.

In October 2017, Facebook (FB:  NYSE) announced plans to build a new data center near Richmond, Virginia.  In its first phase, the data center will encompass one million square feet. In subsequent phases, Facebook will add another 1.5 million square feet.  The price tag is a whopping $1 billion.  With a price tag that large it is understandable that Facebook would want to economize as much as possible.  A building that large will require significant power.  The company has agreed to power the data center with solar energy from Dominion Energy (D:  NYSE) based on Virginia.  Dominion has built 1,200 megawatts of solar power infrastructure in nine states, of which 66 megawatts are operational in Virginia.  The rest of what is required to supply Facebook and more will be constructed over the next couple of years.  In total, Dominion plans 5,200 megawatts of solar power around Virginia over the next 25 years.  It is an ambitious goal.

Microsoft, Amazon and Facebook are three excellent examples of successful, growing companies that have put a priority on energy economy and renewable sources.  With ample profit margins, any of the three can commit to large projects and make bold moves in design.  That includes renewable energy.  Interestingly, in each of these three cases, the renewable energy will be competitive in terms of cost with conventional power sources.  Thus selection of renewable power is no longer an altruistic choice intended to support a cleaner environment.  Rather the choice of renewable power has become a matter of efficiency and economy in the ordinary course of business.  This appears to confirm solar and wind energy have achieved the scale that make them viable energy alternatives for large, modern business.

The important point for investors is that the investment decision is no longer contingent on proof of technology or concept.  Now the investment decision for any number of renewable energy sector players such as Dominion Energy or Lincoln Clean Energy  is on basic business fundamentals -  market share, operational efficiency, leverage.

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.