An Allegory of Uncertainty for Base Load Generation

摘要

Investment in U.S. base load generation is risky business due to uncertainty in energy prices, carbon policy and regulatory oversight. Demand for electricity continues to grow, reserve margins shrink, and yet announced investments in base load units are cancelled or delayed. Tightened supply exacerbates price volatility, while political and regulatory activities increase risk to generation investments without promising the requisite returns. With so many mixed signals, industry participants may feel as if they are part of Dante's "Divine Comedy," alternating among the 13th century canticas of heaven, hell and purgatory. Within this saga, how can utilities make long-range plans to meet demand? If regulatory assurances are not enough, real options theory may unlock investment in base load generation.