Traffic on the Las Vegas strip, where lights were turned off this weekend for Earth Hour.
Tensions between two competing visions of power markets rose to the surface during early discussions among the industry’s elite gathered in Las Vegas today to consider the state of global energy.
There has been sustained tension in the industry since deregulation efforts began more than a decade ago between the appeal of central planning for energy infrastructure development that can underpin long-term investments and the attraction of a free market approach that is arguably both more responsive to changing conditions and can hold down cost inflation.
The tension between the two approaches, often interlinked as the complexities of energy markets play out, has risen in recent years as the generation mix in the US has begun to shift amid changing fuel price dynamics, regulatory uncertainty and the background of a slow economic recovery in the US.
“I cannot think of a time when the industry was as tumultuous as it is today,” Essential Power CEO Tom Rainwater told the Platts Global Power Markets Conference in Las Vegas, Nevada this week. The GPM conference attracts financiers, project developers and sector analysts seeking insight into the state of power markets, and attendance climbed this year over last as concerns about political risk and the prospect of sustained low natural gas prices have proliferated.
The challenges for the generation sector vary by fuel type and locale, said CEO of international utility giant EDF Eric Bret, citing the potential expiration of the federal production tax credit for the wind industry and low natural gas and market design at the state level as challenging for the nuclear industry.
Early panel discussions at the event divided between concerns about a “diversified” energy policy that supports renewable generation sources through credits like the wind PTC and arguments in favor of allowing markets and customers to decide, which would largely at this time favor natural gas generation despite the fuel’s volatile price history.
Find out more about the wind industry and the potential fallout from the expiry of the PTC on Breaking Energy here.
The approach had its detractors, even as mutual agreement over the importance of some form of energy policy was reached. “We have a long way to go before we need to worry about diversification in this country,” Calpine CEO Jack Fusco said at the conference this morning. The US remains awash in natural gas because of technology developments, and with coal plants largely remaining open despite new emissions rules, the focus should be on cost-cutting and allowing customers to set priorities, Fusco said.
The role of transformative technologies and the importance of funding new energy research was cited by a number of conference attendees, and Fusco underlined the approach in his comments. “We should be funding the US universities in [developing] the next greatest thing,” Fusco said, citing the complexities of current clean energy approaches and a reliance on outdated emissions control technologies by environmental regulators and power companies.