Now would have to be one of the most exciting times for the energy sector. You might have thought the best time to invest in power demand management or captive generation capacity was during the recent energy bubble when oil when to $140/barrel and uranium prices to $US140/kg. The problem was those movements were always unsustainable, and only resulted in the alternatives being over-priced. We have now found a bottom in oil prices, and we can expect several alternative energy technologies to become more competitive in coming years. We are already seeing a series of reforms which are making demand management and distributed power investments more compelling. There is one aspect of the market which people need to watch with caution. The current media support for greenhouse gas abatement is a 'perceptions bubble' which will burst in the not too distant future. I question whether we will see emissions trading schemes, and that we will see a more governments adopting indirect carbon tax schemes, and that was ultimately what the abatement schemes were all about anyway. Just another bubble to burst in the 'abatement' industry, following on from the damage Western governments have done to financial markets.
The problem of course is that many investors are investing in power generation on the bassis that those plants will be underwritten by carbon emission credits. I guess there is the promise of credits being honoured if you get them, but I really question whether the schemes will actually get implemented. I'm expecting these schemes to be dropped in favour of taxes. The implication of course is - it will make no difference - its still a distortion that favours renewable energy projects.
The other aspect of the market evolution is the improvement in renewable technologies, and their falling prices. Most of these units are being targeted for small users like businesses and households. Underpinning these units will be the ease of getting approval for these plants from the local council, the extent to which the plant is subsidised, and the price at which retailers will buy your surplus power. Unless there is some compelling reason to buy from small distributed generators, then this might be the most important factor.
Remember the problem with these projects is that its all capital cost, with low operating costs. The good news is that you will be competitive in years to come, but you might still be paying in terms of opportunity cost. much will depend on the current investing setting.
The problem of course is that many investors are investing in power generation on the bassis that those plants will be underwritten by carbon emission credits. I guess there is the promise of credits being honoured if you get them, but I really question whether the schemes will actually get implemented. I'm expecting these schemes to be dropped in favour of taxes. The implication of course is - it will make no difference - its still a distortion that favours renewable energy projects.
The other aspect of the market evolution is the improvement in renewable technologies, and their falling prices. Most of these units are being targeted for small users like businesses and households. Underpinning these units will be the ease of getting approval for these plants from the local council, the extent to which the plant is subsidised, and the price at which retailers will buy your surplus power. Unless there is some compelling reason to buy from small distributed generators, then this might be the most important factor.
Remember the problem with these projects is that its all capital cost, with low operating costs. The good news is that you will be competitive in years to come, but you might still be paying in terms of opportunity cost. much will depend on the current investing setting.
