[lbo-talk] Energy article on Spiked

Dwayne Monroe idoru345 at yahoo.com
Wed Oct 13 04:32:58 PDT 2004


James Greenstein wrote:

<http://www.spiked-online.com/Articles/0000000CA730.htm >

Of which the core argument appears to be...

Most new generating capacity is gas-fired. To get gas to the generators, pipelines are required, which can take years to agree due to the large numbers of overlapping authorities that need to be consulted, and the difficulty of compulsory purchase of land. An additional 38,000 miles of gas pipelines are already needed.

These needs are not being met because infrastructure is politically controversial. There are enough wide, open spaces in the USA that power stations will usually get approval somewhere. But power lines have to cross populated areas. Overhead power lines, for example, are often opposed by residents who have spurious fears about the impact on their health. Gas pipelines are opposed on the basis that they might be a target of terrorist attacks. Cross-cutting authorities at local, state and national levels in the USA provide expanding opportunities for opposition to infrastructure projects. Micro-regulation of the planning process has created bottlenecks that threaten the provision of an adequate electricity supply to consumers.

Neither regulatory authorities nor power producers want to challenge environmental criticism openly. It is much easier to act tactically and retreat on individual challenges. But talking about environmental risk and demanding energy conservation is an evasion of the question: how can we provide enough energy to meet current and future need?

====================

An intriguing argument which boils down, it seems, to this: power companies would like to increase generating capacity to meet our present and future needs and they'd like to do it with gas fired plants but they're being restrained by those pesky enviros (aka "luddites").

I don't know the situation at every power company. Perhaps this is true for some though it sounds a bit too much like the sort of blurb you'd read in a glossy, annual report "Water and Power continues to look to a brighter tommorow but complex environmental laws and overzealous activists make our mission, protecting America's energy future, more challenging than ever before..."

I do know however, the situation at one, quite large (Fortune 500) power firm, based out of Ilinois, with generating assets all over the United States (power industry adepts will be able to discern which one).

I know because I'm currently consulting at this firm. I'm doing what's called Enterprise IT Strategy Consulting - a grand and vainglorious label for multimillion dollar, computer powered late nights doing things like 'engineering' and 'architecting' and relentless take-my-work home-ism.

Because IT weaves its way into all aspects of the business and because tremendous amounts of money are being spent per my suggestions, I'm forced to sit in on meetings with people who steer the corporate ship and listen to their plans.

I also work closely with the technical rank and file, who have an even better idea of what's going on.

So I've a good sense of the strategies, motivations and, as Americans say, 'concerns' of this firm.

Applying your argument to this particular energy company I'd say you're not totally wrong - regulations and environmentalist actions have some effect upon generating asset decisions - but you're not as right as you think. The retreat from gas generation is not entirely (perhaps not even mostly) due to environmentalist created obstacles.

It's a matter of choice.

In the case of the firm I know best - let's just call them Water and Power - the drive is for control of the nuclear market which, the generals theorize, will be in the command position in the not too distant future.

They have plenty of gas turbine generating assets but they're selling them; they don't want them. They're expensive to maintain (or so they say) and don't produce, from the financial unit's point of view, the proper return on investment per kilowatt. The companies they're selling these gas turbine plants to are not building new ones; better to grow your gas generating assets via acquisition than construction.

Water and Power is hopeful Mr. Cheney will help them get the capital they need from the US taxpayer. They reckon the cost should be distributed while the profits mostly stay in a few (a very few) hands.

In other words, profit and loss considerations (not moved in any serious way by environmentalist complaints) are driving the decision to divest themselves of and pay no more attention than absolutely necessary to these gas turbine assets you seem to believe they're eager to build.

Perhaps the situation is different in the UK but this is what I'm seeing here.

.d.



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