An Uncertain Future
1 September 2006
By Mike King and Dr. Michael Rosenzweig
In this article, published in the second issue of The World Energy Book from the World Energy Council, NERA Senior Vice President Mike King and Special Consultant Dr. Michael Rosenzweig examine the various uncertainties confronted by potential North American power generators when making investment decisions. Mr. King and Dr. Rosenzweig note that, in addition to the commodity and regulatory risks that have been affecting the industry for years, North America is also facing uncertainty over environmental policy and the implications it will have for recapitalization of the generation sector. In addition, recent experience has highlighted the risks posed by the inherent unpredictability of fuel prices over the normal life time of generation assets, which increases the business risk of generation projects. While the authors acknowledge that the issues confronting the industry are challenging, especially in light of the greater levels of uncertainty, they offer a list of concrete steps that regulators, policymakers, and companies can take to minimize the cost and risk in future power supply choices. They summarize their views as:
