Author
Dan Watkiss is a partner with Bracewell & Giuliani in Washington, D.C., representing power companies, exploration and production and mid-market companies, natural gas pipelines, power and liquefied natural gas project developers and lenders, as well as government agencies and regulators. Contact Dan at Dan.Watkiss@bgllp.com.
Is now the time to invest in big, renewable energy systems and small- the grid’s future topography, what level capital-intensive energy projects—the scale distributed generation—are of high-voltage “aluminum skies” society Full Monty of baseload integrated coal superior to big generation and big will tolerate, and the vulnerability of the gasification combined cycle with carbon transmission projects as measured by ( 1) grid to terrorist attacks and other failures. recapture, a new fleet of nukes, and long- technical feasibility, ( 2) cost, ( 3) negative Until these uncertainties are considered distance high-voltage transmission lines externalities (primarily environmental), and narrowed, if not resolved, capital to connect hinterland generators with ( 4) generating and delivery reliability, investments today in big generation the densely populated coastal cities? and ( 5) security from accident or attack. and big transmission solutions will be
Every week it seems that some In our post-industrial digital very risky, potentially locking in energy utility, developer or industry investor economy, electricity is essential to nearly futures that may prove unwise. announces grand plans to chase one everything a growing number of us do That is why Dr. Sovacool’s findings or another of these big projects. What is driving this capital sanguineness?
Is it a sober assessment of supply and demand? Or is it instead a function of near-sighted energy and economic policies exacerbated by various economic subsidies and incentives that the Energy Policy Act of 2005 targets disproportionately toward big generation and big transmission solutions to the nation’s energy needs?
Questioning big capital-intensive projects today and getting comfortable with our answers before investing in them could prove critical to the industry’s future flexibility in pursuing a number of objectives, including energy security and a scaled-back carbon footprint for our power sector. The success of big power infrastructure investments depends critically on assumptions at work, home or play. According to the should be a timely and welcome call about not only supply and demand, but Energy Information Agency, demand is to action for utilities, regulators, and also future technological innovation, increasing and will continue to increase Congressional appropriators of tax future environmental controls, and nationally at an average annual rate dollars to energy project developers. reliabilitydemandsthatareincreasingly of 1. 8 percent. New or replacement Smaller scale modular technologies influenced by post-9/11 security generation and transmission surely will can outperform big generation and considerations. These assumptions are be needed to keep apace. Decisions on transmission projects and at the same fraught with uncertainty. what generation to build and where, time preserve policy flexibility to pursue
Dr. Benjamin Sovacool, a professor however, need to be made against the other energy futures. at Virginia Polytechnic Institute and State looming large uncertainties of unproven Dr. Sovacool and others have University, in a June 2007 paper, “Coal technologies (such as carbon recapture recognized that these technologies and Nuclear Technologies: Creating a and off-site storage of spent fuel rods) and cost less in the long-term, but often are False Dichotomy for American Energy heightened emissions controls, including not pursued because of high front-end Policy in Policy Sciences,” rigorously legislated controls on carbon emissions. costs to their localized beneficiaries. makes the case that three alternative And in the case of investments in new That is why programs that levelize the energy technologies—energy efficiency, transmission lines, the uncertainties are MONTY continued on 35
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