Dominion Energy (D) has recently signed a Memorandum of Understanding with Amazon.com (AMZN) to explore innovative new development structures for enhancing potential Small Modular Reactor (SMR) nuclear development in Virginia. This collaboration aims to bolster Dominion’s presence in the power demand market in Virginia by delving into the less explored SMR technology.
The Importance of SMR Development
In response to the escalating demand for electricity in Virginia and other parts of the U.S., utilities, state and federal authorities, as well as leading technology companies are turning to SMRs as a promising solution. SMRs, akin to traditional nuclear power plants, generate continuous, clean energy but with a smaller footprint and lower upfront costs.
To meet the projected doubling of power demand in Virginia over the next fifteen years, Dominion Energy is diversifying its power generation sources. This includes investments in offshore wind, solar, battery storage, and natural gas. SMRs are anticipated to play a vital role in Dominion’s energy mix in the 2030s.
The recent Memorandum of Understanding signifies Dominion Energy’s strategic foresight in the electric utility sector as it aligns itself to address the burgeoning power demands of the future.
Potential Growth for Dominion Energy’s Stock
The emergence of SMRs as an attractive energy source is driven by the cost-saving benefits and flexibility it offers to clean energy portfolios globally. Dominion Energy is well-positioned to leverage this trend, as reflected in its partnership with Amazon. According to a Wood Mackenzie report, the SMR project pipeline has reached 22 gigawatts in the first quarter of 2024, necessitating substantial investments.
Expansion of SMR Initiatives in the Utility Sector
In addition to Dominion Energy, another major player in the utility sector, Ameren Corporation (AEE), is capitalizing on the growing SMR market. Ameren Missouri, a subsidiary of AEE, has teamed up with Westinghouse Electric Company to secure funding from the U.S. Department of Energy for two SMR projects. This partnership includes plans for constructing a Westinghouse SMR at Ameren Missouri’s Callaway Energy Center.
AEE’s robust long-term earnings growth rate and positive earnings estimates highlight the growth potential in the SMR space for utility companies. Dominion Energy’s collaboration with Amazon exemplifies its strategic vision to navigate the changing energy landscape.
Performance of Dominion Energy’s Stock
Over the past three months, Dominion Energy’s stock has outperformed the industry, showcasing an 18.1% increase compared to the 9% growth of the sector.
Dominion Energy’s Outlook and Stock Recommendation
Dominion Energy currently holds a Zacks Rank #3 (Hold). For investors seeking opportunities in the utility sector, NiSource (NI) presents a favorable option with a Zacks Rank #2 (Buy). NiSource’s strong earnings growth rate and positive earnings outlook underscore its potential for investors.