I am pleased to forward 5’s third quarter overview of the energy market. The speed and scope of changes to energy market continues to astound us. In this letter, we focus on the impact that changes in technology and consumer demand are having on another major industry player, traditional utilities, as well as the potential impact of such changes on our clients.A lead story by Rebecca Smith in the WSJ on July 28, 2014, “Electric Utilities Get No Jolt From Gadgets, Improving Economy – Electricity Sales Anemic for Seventh Year in a Row”, summarizes this turmoil very well. The story observes that for the first time, an improving economy and consumers’ purchases of more and more energy consuming devices, are not translating into increased consumption of electricity. This trend is reflected in current electricity and natural gas prices.

For decades, R&D firms have been striving to bring down the cost of large-scale batteries to be cost-effective for utility-scale power storage. Units have already been installed at a handful of US utilities, with systems having 10-20 MW of peak output. All are designed mainly to help grids ride through brief problems, such as the failure of a power plant or transmission line, while power is switched to other sources or lines.

I am pleased to forward 5’s 2013 second quarter overview of the energy market. Like the prior letters, this note covers some notable trends and developments over the past quarter.

Let me start with a simple observation: it is a great time to be an energy consumer.Almost all other segments of the energy market are under pressure. Producers are pressured by an abundant supply of natural gas and oil driven by hydraulic fracking. Generation owners face difficult investment decisions. They manage power plants that struggle to turn a profit at today’s wholesale prices and face new challenges from demand response, renewables and environmental legislation. Retail suppliers continue to see increased competition and compressed margins.