[BETA] Fortnightly

Dramatic changes are coming to the electric industry, sparked by a surge of renewable energy and related transmission. Growth in demand-side resources, conservation and smart technologies will add integration dilemmas to an already complex power system.

(September 2009) The industry’s best companies are weathering the financial storm reasonably well, with the F40 delivering equity returns in the 14-percent range for fiscal 2008. However, falling sales and rising costs are putting heavy pressure on balance sheets—and on regulatory relationships. Companies that balance customer value and shareholder value will be most likely to thrive in the new normal.

In light of coming GHG legislation, price transparency is the key to achieving cleaner generation through the dispatch of lower-carbon sources.

American utility consumers face a compelling generational challenge: satisfy the need for a reliable power supply, at a reasonable price, while also reducing greenhouse-gas emissions and building a sustainable energy industry. How the government structures green-energy mandates will determine how long existing power plants remain viable.

So far, states have taken the lead in carbon-control strategies. These state actions, however, could lead to constitutional conflicts—as recent court battles demonstrate. Only the U.S. Congress can regulate interstate trade, so states must step carefully in controlling carbon leakage.

Various approaches to distributing emissions allowances spark a heated debate over costs and fairness, but the allocation methodology doesn’t determine whether a regulatory scheme will reduce emissions. Auctioning allowances and distributing them for free both offer advantages and challenges for a successful cap-and-trade system.

Money may be difficult to come by for Wall Street financiers in these dark days, but apparently not for electric transmission construction—at least so far. A rash of recent orders from FERC shows that generous financial incentives remain available to companies seeking to expand the nation’s grid capacity.

The era of easily available, affordable energy rapidly is ending and our society is realizing that our energy infrastructure is severely inadequate to supply the energy demands of the future. The major issue facing the sector today is how to fund and deliver this new climate-friendly infrastructure, which is currently estimated will cost almost $2 trillion between now and 2030.

Regulation of greenhouse-gas (GHG) emissions and other efforts to control these growing environmental concerns increasingly are impacting businesses, and investors are seeking more and better information on climate-change risks to make informed investment decisions.

As president and CEO of ISO New England, Gordon van Welie has his feet planted firmly on each of two sides of a cultural divide. First, as a transmission system operator, van Welie must keep the lights on and the wires humming. At the same time, he must run a regional market—an ongoing experiment in freewheeling capitalism in an industry fraught with more long-term uncertainty than perhaps any other.