Will Your Environmental Compliance Decisions Meet Today's Challenges?
Recent regulatory and political developments will undoubtedly influence the future environmental compliance and generation asset portfolio choices and call into question legacy decisions. All power companies are undertaking a fundamental review of their generation or supply portfolio in light of the major sources of today's environmental uncertainty. The preservation of billions of dollars of shareholder value are at stake.
By Mark Matousek and Eric Chung
Strategic Decisions Group
November 2006
Title IV of the 1990 Clean Air Act expanded the requirements of the 1970 Act, calling for approximately 50% reduction in sulfur dioxide emissions by 2010 from 1980 levels and, in addition to specifying mandatory investments, proposing the development of market-based solutions. Given the size of the investments required to comply with these regulations, decisions about how to reduce sulfur dioxide are among the most important generation companies face. About two-thirds of coal-fired generation capacity remained unscrubbed in 2005, as companies struggled to make quality envirnonmental investment decisions for shareholders and ratepayers. Enormous uncertainties created from interrelated shifts in market, regulatory, and political climates further increase the complexity of these decisions.
With utilities estimated to require investment of $50 billion to $70 billion in scrubbers to reach the 50% reductions in sulfur dioxide emissions by 2010, understanding and addressing these uncertainties are critical to the financial health of the industry. Billions of dollars of shareholder value are at risk from poor capital investment or asset portfolio decisions.
