Investors should watch for key indicators in the power sector (Part 7 of 11)

(Continued from Part 6)

Electricity generation sources

Electricity is a secondary form of energy. Electricity is derived from energy sources that are available in nature—often termed as a primary source of energy. For example, coal, natural gas, petroleum liquids, and wind are used to generate electricity.

Electricity generation from natural gas

In September 2014, the net electricity generation in the US was 338.9 million megawatt-hours. For the month, nearly 89% of the electricity was generated by coal, natural gas, and nuclear sources.

Electricity generation from natural gas increased by 4.4% in September 2014—compared to September 2013. During the same period, electricity generation from coal decreased by 5.2%. Since May, coal’s monthly electricity generation decreased on a year-over-year, or YoY, basis.

American Electric Power Company (AEP) and NRG Energy (NRG) own the largest capacity of coal and natural gas based assets, respectively, in the US. Both of the companies are part of the Utilities Select Sector SPDR (XLU).

Electricity generation from nuclear power plants grew by 2.6% in September 2014—compared to September last year. This is the biggest YoY jump in nuclear electricity generation in 2014. In terms of nuclear power, Exelon Corporation (EXC) is the leading power company in the US. It owns a capacity of nearly 19,000 megawatts in the US.

Generation from renewable sources

Electricity generation from renewable sources continued its momentum in September. The total electricity generation from renewable sources more than tripled in the last decade. Monthly electricity generation from renewable sources grew by 4% in September 2014—compared to September 2013.

NextEra Energy (NEE) has the largest renewable capacity among all of the power producers in the US. Power producers are adding more renewable assets to their generation capacity because emission rules are getting stricter across the US.

Continue to Part 8

Browse this series on Market Realist:

• Part 1 - The US power sector turns in strong performance this year

• Part 2 - A drop in electricity consumption is normal during the fall

• Part 3 - US states with the highest growth in electricity sales