The need for many hundreds of billions of dollars in capital expenditures creates huge opportunities and challenges, especially in a more challenging credit environment.
Roger Wood is head of Rothschild’s Power & Utilities Group in North America. Contact him at firstname.lastname@example.org.
The utility industry needs to prepare for a period of much higher capital expenditures. This results from the confluence of several factors:
• Shrinking generation reserve margins, as the glut of surplus capacity from earlier in the decade has been worked through much more rapidly than expected;
• Spending on compliance with NOx, SOx, and mercury requirements;
• Pressures to invest in lower-carbon—and more expensive—generation technology and associated infrastructure, including transmission;
• The need to replace aging transmission and distribution (T&D) infrastructure, much of which was put in place 30-40 years ago and is nearing the end of its design life;
• Continued robust rates of population growth and economic growth in many parts of the United States, resulting in the need for system expansion; and
• Technology spending on areas such as customer information systems and automated meter reading.