U.S. energy infrastructure heads into next year on generally solid footing, though increasingly common extreme weather throughout the country merits some caution according to Fitch Ratings in its 2019 outlook report.
Extreme weather represents the only real potential disruptor to the sector in 2019, particularly the California wildfires that could threaten the solvency of California investor-owned utilities and recent hurricanes in the Southeastern part of the country. While the consequences of such events are typically insurable, the credit quality of some energy projects could suffer if events of this magnitude occur more frequently or are equally severe.
Federal legislation is another area to watch for energy infrastructure next year as the country gradually transitions to the Affordable Clean Energy (ACE) rule from the Clean Power Plan (CPP). ACE stands to extend the life of certain coal plants, though many others are well on their way to being retired in favor of more economically competitive gas-fired and renewable capacity.
Natural gas projects are likely primed for the most sustained growth over time even with power prices likely to remain flat. Oil and natural gas output continues to grow, though pipeline logistics and capacity may be challenged. Demand for renewable projects is still robust, though curtailment risk is higher in regions where supply can exceed demand.
Source: Fitch Ratings
