If utilities fail, governments will have to step up and underwrite the switch to low-carbon alternatives-an unappealing prospect at a time when countries are going deep into debt to fix their economies. The worldwide recession exacerbates the problem and, because it consumes most of business and government leaders’ attention, threatens to postpone any real resolution of it. It’s unrealistic to think that regulators will permit power companies to raise rates repeatedly, and with sales declining, utilities won’t be able to attract enough capital. Right now utilities in the industrialized world need enormous amounts of capital to finance the $1.5 trillion transition to low-carbon production. We need healthy power companies to keep the economy running and underwrite the transition to climate-safe forms of energy. In most industries, it’s all well and good for companies with outmoded business models to collapse and disappear, but not in utilities.
Sales are already flattening, and they’ll only fall faster as governments put in place more incentives to control greenhouse gas emissions. But electricity and gas customers-aided by the utilities themselves-are reducing consumption. Utilities have always assumed that their output would continue to grow, allowing for economies of scale and lower prices. Something is seriously wrong with the basic assumption behind the business model of utilities, and companies of every kind are likely to feel the consequences.
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