A game you can’t win
The situation reminds me of that old street game, once popular in cities like New York, called Three-card Monty. You guess which hat the card is under after the scammer has moved the hats around the table at a dizzying pace. A plant in the audience makes sure you never win your bet. Power generators are essentially being asked to pick an option to meet electricity demand while the cards are constantly in motion. It’s no wonder Pat Wood III, former chairman of the Federal Energy Regulatory Commission and principal, Wood Resources, began his “State of the Industry” keynote address by saying, “The state of the industry is cautious.”
Thomas Brooks, VP energy for Constellation Energy, noted that electricity suppliers must meet three competing objectives: Supply abundant, cheap energy; deliver flawless reliability; and reduce environmental impact. CEOs must determine what option will meet these objectives for the next unit they build. The problem is that no option is likely to meet all three objectives well at all.
Which fuel would you pick?
Although it wasn’t the knockout punch that Lee threw at GE, Morris jabbed at nuclear throughout the session. At one point, he asked how a utility with a $10 billion market cap could build a $17 billion nuclear unit. He’s got a valid point, when you start thinking through the financial issues.
But other fuels have their problems, too. There wasn’t much support for natural gas with this crowd. Morris said he was “not bullish” on the fuel. And Brooks added that electric power should not follow the same regulatory policy as the natural gas sector. Jim Rogers, CEO of Duke Energy, which recently merged with Cinergy Corp, warned that greater demand for gas and liquefied natural gas imports could tie the price of electricity in this country to world oil prices.
Though new coal units are popular with these CEOs, coal’s difficulties were acknowledged. Wood called coal a “pariah today,” although he identified some quiet successes where units have been built. Morris insisted that clean coal is more timely than nuclear. Fred Fletcher, assistant general manager of Burbank (Calif.) Water & Power, acknowledged that half of his company’s electricity comes from coal, except that’s it’s all located out of the state. Rogers has gotten approval to build a new unit in North Carolina but has to shut down an equivalent amount of old coal. “We’re not adding to the fleet,” he said.
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