End of year perspectives in utility industry

According to strategic management consulting firm Booz Allen Hamilton, the strategic issue taking center stage in the utility industry in 2008 will be how to reconcile a continually increasing need for energy with urgent concern over the effects of carbon emissions. While this issue cannot be solved by the utility sector alone, its leaders need to set the direction. In a recent letter to industry leaders, Booz Allen outlined each of the potential solutions to this national problem...

Dec 20th, 2007

Dec. 19, 2007 -- According to strategic management consulting firm Booz Allen Hamilton, the strategic issue taking center stage in the utility industry in 2008 will be how to reconcile our society's continually increasing need for energy with our urgent concern over the effects of carbon emissions. While this issue cannot be solved by the utility sector alone, its leaders need to set the direction. In a recent letter to industry leaders, Booz Allen outlined each of the potential solutions to this national problem -- and their shortcomings.

1. The Natural Gas Solution: Gas-fired generation offers a proven, practical, and flexible stopgap for supply shortages and carbon mitigation, but it seems increasingly unlikely that prices will remain at their current range.

2. The Coal Solution: While coal is relatively cheap, abundant, and accessible, its future as a widely used energy source is clouded by the high likelihood of regulatory intervention due to is environmental uncertainties.

3. The Nuclear Solution: Despite encouragement on many fronts, including legislated subsidies, it is unlikely that growth in nuclear capacity will appreciably alter the energy landscape over the next 10 years, due to logisitical challenges.

4. The Renewables Solution: Renewable technologies will remain at the periphery of the supply mix; solar power remains dependent on subsidies, and wind power faces constraints not only in location and intermittency but also in the supply chain.

5. The Smart Grid Solution: The Smart Grid has promise to be one tool in an approach that integrates the supply portfolio with local demand patterns to provide an optimal balance of cost, service and environmental impact- -- but will require close collaboration with regulators.

Booz Allen Hamilton is a strategic management and technology consulting firm offering a full range of consulting services to senior management in industry and government.

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