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Special Report

Industry hopes its centralized assets aren't in the crosshairs.
Fortnightly Magazine - November 1 2001

are potential targets because they "are not subject to rapid regeneration." United States energy infrastructure has inclined toward concentration and efficiencies of scale because there was the perception that terrorists would not strike on U.S. soil. "That creates a substantial vulnerability," Friedman said during a Sept. 24 conference call on energy infrastructure security.

While nothing good can come out of the Sept. 11 attacks, energy independence should now be an issue government officials address in a serious manner, said Hugh Holman, senior research analyst at CIBC World Markets. In 1979, President Carter told the United States that by 1990, it should have decreased by half its reliance on imported oil. Instead, oil imports climbed considerably, Holman notes. "One of the things we can do is ... adopt alternative energy sources other than oil," Holman says.

Seth Dunn, a research associate at the Worldwatch Institute, says distributed generation (DG) has the potential to offer the same reliability for electric power that the Internet has for communications. "DG can provide an invaluable hedge," Dunn said.

In moving to a more decentralized energy structure, Robert Jablon, a Washington-based energy attorney, argues security would be enhanced by a greater focus on local energy production, at least as a backup. "One area of concern is the consequence of disruption of the electricity transmission grid," Jablon said. "In these regards, more attention may also need to be paid to advancing distribution generation."

After winning a ringing endorsement in President Bush's national energy plan released last spring, the nuclear power industry may encounter some turbulence in the short-term from the Sept. 11 attacks. Nevertheless, nuclear power from existing plants will remain economically competitive in terms of cost of producing energy in a period that may see extreme volatility in the price of oil and gas, Cuomo explains.

For the energy industry as a whole, Cuomo says it, like all other industrial sectors, is certain to be hurt by the short-term economic effects from the World Trade Center and Pentagon attacks. The economic rebound that analysts were forecasting for the fourth quarter of this year prior to Sept. 11 probably will begin to occur no earlier than the second quarter of 2002 because of the disruptions, he predicts.

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