Climate Change Regulation Uncertainty Vexes Decision-Makers
David Barker, an SDG principal consultant with extensive experience in scenario planning and decision-making for electric utilities, tells industry executives that anticipation, agility, and commitment are the critical success factors.
PHOENIX – March 3, 2010 – David Barker of management consulting firm Strategic Decisions Group recommended that utility executives stop trying to wait for the outcome of climate change regulation and instead "accept the uncertainty and work with it."
Mr. Barker, a principal consultant with SDG, made his remarks at the 13th annual Energy & Environment Conference & Expo held in February in Phoenix. The conference brought together more than 2,000 senior energy and environment professionals to explore cutting edge technologies and strategies concerning renewable energy and carbon management.
"How can we possibly make decisions on major investments in an environment that is so uncertain?" Mr. Barker told the assembled energy executives. "We start by creating qualitatively different scenarios for the future and then evaluate how to respond in each scenario."
Mr. Barker presented six scenarios that his firm has developed to aid clients in specific decisions. His examples focused on utility generation portfolios, but apply equally to transmission investments, smart grid, and demand-side programs. "Anticipation, agility, and commitment are the critical success factors," he said.
"Faced with such perplexing strategic choices, what should the decision maker do?," Mr. Barker said while presenting a simplified decision matrix as an example. "She or he can't wait for the future to be clearer because it probably never will — or at least not until it is too late to make a value-creating decision."
But by quantifying the risk and value of decisions under every scenario, Mr. Barker said, it is possible to separate one's choices into two groups, which he called "no regret" decisions and "scenario-specific" decisions.
"We can determine that some decisions are value-creating under almost all futures," he said, "while others have very different outcomes depending on which future actually materializes."
While the "no regret" decisions can be implemented immediately, the scenario-specific decisions require an approach that sequences decisions, identifies signposts, and creates options for downstream decisions.
A copy of Mr. Barker's presentation, "Rough Waters Ahead," is available for download.
About SDG
Founded in 1981, Strategic Decisions Group is an international management consulting firm renowned for its expertise in strategic decision-making, risk management, and shareholder value creation. Through a collaborative, team-based approach, SDG helps clients find innovative, creative strategies to thrive today, while also helping them build internal competencies and more effective decision-making processes to meet competitive challenges in the future. SDG has offices in North America, the Middle East, and India.
