Study shows lack of national energy policy, state/federal conflicts having substantial negative impact on the power industry

Nov. 25, 2002 — A new economic assessment of the Midwest power markets, “A Guide to Winning in the Wholesale Power Markets — Generation, Fuel, Transmission: Volume I, The Midwest,” co-authored by Hill & Associates of Annapolis Maryland and BlueWave Resources of Fairfax Virginia, has uncovered surprising findings for the power industry, including,

* Natural gas generators are going to find it increasingly difficult to be profitable as lower-cost coal generators continue to beat them to the market and over capacity of low-cost gas generation keeps power prices depressed.

* More and more power companies are finding it difficult to attract investment, due to regulatory uncertainty, absence of final federal energy policy, increased likelihood of state/federal policy conflicts, and the uncertainty of the energy markets.

* A number of renewable energy projects, such as wind plants, are likely to be suspended unless tax incentives are extended, potentially scaring off investors.

* There are opportunities for coal to move ahead in the energy industry as new technologies enable generators to take advantage of its attractive pricing and availability.

* Environmental limits will continue to impact all of the potential future players.

The analysis looks at numerous critical energy issues in the Midwest, including the outlook for power prices, the competition between gas and coal power generation, the financial viability of generating plants in the region, including the many “unhedged” plants, and the opportunities and risks for nuclear generators, including a discussion of the role the new generation of nuclear technologies may play.

In a joint statement about the study, Jeff Brown of BlueWave Resources and Jeff Watkins of Hill & Associates, the co-authors, said “our market projections and financial data show that although there are significant risks for power generators in the Midwest throughout the forecast period, opportunities for profits will be available for selected operators in the Midwest.”

The study was conducted for the next decade using the advanced computer simulation capabilities of Hill & Associates and the economic, financial, and energy insights from BlueWave. For more information on this study, contact Hill and Associates or BlueWave.

Source: Hill and Associates

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