The electricity system in the United States received renewed attention after the August 2003 blackout that affected more than 50 million customers across the Northeast United States and caused...
not understand were used to generate fictitious value. Until management, regulators, and investors and sources of investment funds are made aware of the value of this newer approach to investment valuation and are comfortable with it, distributed generators will be ignored even when they are the economic investment. Unfortunately, real option calculations are often most appropriate for computing value for several of the other alternatives considered here.
Future Prospects for Alternatives to Conventional Generation
Although a reduction in spark spreads in the last year has dampened investment interest in distributed generation, the rise in the level of natural gas prices, both wholesale and retail, has increased the level of interest in solar technologies and in wind. Price matters. Yet future prospects for these technologies as well as fuel cells will be much influenced by other factors as well:
- Improvements in methods for determining the value of assets such as distributed generators;
- Information programs, taxes and subsidies at the state level;
- Continued sharing of knowledge of solar building and equipment technology by builders and candidate building owners;
- Labeling and tracking the green power commodity and technology; and
- Assigning initial green-power property rights to utilities.
In addition, over the next year it is expected that there will be an increase in the public awareness of the relationship between domestic security risks and conventional generation. Of course, this will influence the prospects for investment activity in alternatives.
Articles of Reference on Distributed Generation
- Wind Turbines and the Importance of State Programs
- Jeff Price, "The Production Tax Credit: Getting More Credit Than It's Due," , page 38-41.
- Solar Thermal and Solar Photovoltaic
- U.S. Department of Energy, "Solar Decathlon 2002 - Energy We Can Live With" DOE/GO-102002-1580, September 2002.
- Energy Information Administration, U.S. Department of Energy, "Renewable Energy Annual 2001 with Preliminary Data for 2001," Nov. 22, 2002.
- Fuel Cells Survey
- Mark Cropper and David Jollie, "Fuel Cell Systems: A Survey of Worldwide Activity," Nov. 14, 2002, Fuel Cell Today,
- Carl J. Levesque, "How Soon Is Now?," , November 1, 2001, page 18-28.
- Real Option Value and Distributed Generation
- Jonathan A. Lesser and Charles D. Feinstein, "Distributed Generation: Hype vs. Hope," , June 1, 2002, page 20-28.
- John C. Hull, fifth edition, Options, Futures, and Other Derivatives, Upper Saddle River New Jersey: Prentice Hall, 2003, "Real Options," page 660-677.
- New York Public Service Commission, "Opinion and Order Approving Pilot Programs for Use of Distributed Generation in the Utility Distribution Planning Process," Opinion No. 01-5, Oct. 26, 2001.
- Green Power Labeling and Technology Tracking Issues
- Andrew Greene, "What Color Is Your Electricity?" Public Utilities Fortnightly, July 1, 2002, page 14-21.
- Green Power and Property Rights
- Paul N. Belval and Mary F. Rossitti, "The Green Controversy" , Nov. 1, 2002, page 34-40.
- Overview of Cost Estimates for Alternative Technologies and Carbon Dioxide Savings and Other Important Issues
- Henry R. Linden, "Bridging the Carbon : Fossil Fuel Use", Public Utilities Fortnightly, Nov. 15, 2002, page 32-41.
- Technology Change
- John Herbert, Clean, Cheap Heat, The Development of Residential Markets for Natural Gas in the United States. New York, Praeger, 1992.