Nine companies, consortia, or joint ventures are planning approximately 12 new nuclear power plants in the United States. How do the business challenges they face differ from the challenges faced...
Preparing for the Next Nuke
Using scenario analysis to help utilities map out their strategies.
in Terrorism & Turmoil and Return to Reliability, this business environment suggests less upside for diversified energy companies’ unregulated services.
• Integrated Oil/Gas. Integrated oil/gas strategy will face its greatest challenge and greatest business risk in Terrorism & Turmoil as gas and oil supplies from outside the North American continent become constrained. The Nuclear Resurgence business environment with healthy economic growth should be attractive for this strategy and possibly offer a good foundation for further downstream investment into power.
• Energy Merchant Co. Energy merchants will be hard hit in Terrorism & Turmoil. By contrast, energy merchants could thrive in a Return to Reliability environment, and gas merchants should have a significant opportunity to gain as coal comes under increasing environmental pressure in Green World.
• Renewable Energy. The business conditions in Green World and Nuclear Resurgence, while turbulent, play to renewables energy’s advantage as carbon-burning fuels are taxed. A renewable energy focused strategy will face new growth opportunities in Terrorism & Turmoil as natural gas becomes constrained and reliance on coal grows. Reliability business environment is likely to provide the greatest challenge as renewables will have to compete head-to-head with coal and natural gas.
• Technology Focused. Like renewables, because they start from a small base and are likely to be in a position to take advantage of favorable cost differentials in the future, technology focused strategies can be expected to be increasingly successful across all four scenarios. Terrorism & Turmoil will be a difficult environment, but technology companies focused particularly on clean coal are likely to see growth.
Looking for the Strategic “Sweet Spots”
The powerful predetermined elements that exist across scenarios indicate common drivers and elements in all future business environments (see Figure 4). The key overlaps in the energy value chain that may offer strategic sweet spots—businesses with a high likelihood of seeing growth in the future—are identified below.
Natural Gas. A key defining feature of all scenarios is that demand for natural gas requires all potential sources to be explored, including frontier and LNG. Thus, significant investment likely will be required along the natural-gas value chain, including energy trading and risk management capabilities in Nuclear Resurgence and Green World, the expected high gas consumption scenarios.
Renewable Energy. Wind and solar energy are expected to grow across scenarios as economic, regulatory, technological, and societal pressures drive demand for these power sources. The higher-energy price scenarios—Nuclear Resurgence and Green World—are expected to be particularly attractive environments for renewable energy.
Pollution Control and Emission Markets. Existing environmental regulations continue to be enforced in all four scenarios and are tightened in two scenarios. Present efforts to regulate SO 2 , NO X , and Hg continue, while Green World and Nuclear Resurgence scenarios move a step further to tighten CO 2 emissions. These trends represent significant challenges for the industry and growth opportunities for pollution control companies.
Nuclear Units. Demand for environmental quality, rising natural gas prices over the last 10 years of the time period, and the solid operational record of the country’s nuclear fleet indicate that the value of