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Analysis

Energy M&A update: Q2 2019

In the second quarter of the year, the energy industry saw an increase in America’s renewable energy capacity,¹ as it surpassed coal. However, this doesn’t mean energy from renewables has passed other energy sources. For example, gas production this quarter reached a notable high. This energy mergers & acquisitions (M&A) update provides Deloitte Corporate Finance LLC insights and market data analysis that shed light on M&A trends in the energy industry.

Energy trends

  • America’s renewable energy capacity is now greater than coal1: In April, according to a Federal Energy Regulatory Commission Report, the renewable energy sector recorded more installed capacity than coal for the first time ever. Installed capacity of coal was recorded as 257.48 gigawatts, while renewable energy climbed to 257.53 gigawatts. While installed capacity has grown significantly, it will still be several years before more power is generated by renewables than coal.
  • US energy storage market surges in Q22: The US energy storage market set a growth record in Q1, deploying 148.8 megawatts, a 232 percent increase from Q1 2018, and a six percent jump from Q4 2018. Growth is expected to continue in Q2, as two congressional bills were introduced to expand tax credit eligibility to storage facilities and as major utilities players continue to add contracts. The US market is anticipated to reach $4.8 billion by 2024.
  • Oil’s decline highlights global growth fears3: Oil prices declined early in Q2 amid rising geopolitical tensions and threats of supply disruptions, the latest sign that investors fear trade friction will hit global growth and decrease the demand for crude oil. A surge to multi-year highs in stockpiles, driven by weak refinery demand and a shale-production boom, has helped bring prices down further from triple digit levels last seen five years ago. However, oil prices have since rallied in late Q2 amid rising tensions with Iran.
  • US gas production at a record high4: US gas production rose to a record of more than 37 trillion cubic feet last year, up 44 percent from a decade earlier. Yet infrastructure to move gas around has not kept up. The national benchmark, set at the Henry Hub in Louisiana, recently hit a three-year low of $2.19; however, limited pipeline capacity has created price volatility at regional trading hubs. US homes, power plants, and factories are using more natural gas than ever, but uneven distribution of fuel means that certain customers have had limited access to fuel.

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References

EganMatt Egan, “America’s Renewable Energy Capacity Is Now Greater than Coal,” CNN, Cable News Network, June 12, 2019, www.cnn.com/2019/06/11/business/renewable-energy-coal-capacity/index.html, accessed July 7, 2019.
Catherine Morehouse, “US Energy Storage Market Sees 232% Year-on-Year Growth,” Utility Dive, June 5, 2019, www.utilitydive.com/news/us-energy-storage-market-sees-232-year-on-year-growth/556186/, accessed July 7, 2019.
Amrith Ramkumar, “Oil’s Slide Highlights Global-Growth Fears,” Wall Street Journal, Dow Jones & Company, June 17, 2019, www.wsj.com/articles/oils-slide-highlights-global-growth-fears-11560733588?mod=searchresults&page=1&pos=14, Accessed July 7, 2019.
Stephanie Yang and Ryan Dezember, “The U.S. Is Overflowing With Natural Gas. Not Everyone Can Get It,” Wall Street Journal, Dow Jones & Company, July 8, 2019, www.wsj.com/articles/the-u-s-is-overflowing-with-natural-gas-not-everyone-can-get-it-11562518355?mod=hp_lead_pos7. Accessed July 7, 2019.

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