Duke Energy’s Jim Turner and other utility executives weigh the odds on billion-dollar bets.
Richard Stavros is executive editor of Public Utilities Fortnightly.
It could be described as the world’s highest stakes betting game—power generation development. Not even the recent James Bond movie, Casino Royale, where audiences were riveted by a climactic $100 million poker game, can touch the sums (and risks) that utility executives must face.
According to the Edison Electric Institute (EEI), investor-owned utilities spent $46.5 billion in 2005 and more than $60 billion in 2006 to develop new power infrastructure. U.S. utilities added 5,507 MW and announced 33,998 MW of new capacity additions in 2006. In fact, last year alone, environmental capital expenditures doubled from $3.2 billion to $6.4 billion, said EEI.
Looking at the forecasts for 30 years, the heavy investment required for new generation technologies clearly is a global phenomenon. According to the World Energy Investment Outlook 2006, power-sector companies will spend about $11 trillion dollars by 2030. “That’s for the overall power sector that includes power generation, transmission, and distribution assets,” says Andy Webster, a consultant at Accenture, adding that power generation alone will account for $5 trillion.
Without question, those amounts would impress even the most exclusive casino owner in Monte Carlo, especially as the odds of winning the development game are quickly changing.