Discordant global-warming solutions may end up burning utilities.
Richard Stavros is Fortnightly's Executive Editor.
California Gov. Arnold Schwarzenegger’s surprise move in September to regulate his state’s carbon emissions has the entire industry buzzing over what might come next, such as a national carbon plan. California’s legislation to reduce carbon-dioxide (CO2) emissions by 25 percent by 2020 is forcing a renewed debate over global warming that some believe may force Congress to move forward with a national plan. Such thoughts are fueled by grave concerns over the alternative—that states, left to their own devices in regulating carbon, will pass a patchwork of inconsistent rules that harm the economy.
How will utilities in the next 10 years manage a multi-billion-dollar infrastructure buildout, higher interest rates/cost of capital, diminishing free cash flows, state renewable mandates, and political pressures to keep rates or power prices low, all while complying with carbon emissions programs that emphasize higher-cost fuels?
This question will define the utility industry. Meeting the challenges may depend on whether a national carbon program that regulates carbon emissions is established.