Vast reserves of natural gas in Appalachian shale could shift the entire energy market. Indeed, if gas prices fall, the challenge of increasing the use of renewable sources of energy will rise
The head of a private equity firm with major investments in oil and gas exploration discusses the structure of the energy industry and what it means for sustainability efforts. Jonathan T.F. Weisberg interviews Howard Newman, President and CEO, Pine Brook Road Partners, LLC.
In the 1990s, when the energy market was first deregulated, the market quickly went into excess supply, at which point in time the price for capacity went to zero. The profit you can make selling into today's markets is not big enough to induce new capacity since the price for power no longer has any capacity charge in it. That's good for consumers. Power is cheap. Consumers like cheap power. But the problem is no one will build new power now without contracts.
[This article has been reproduced with permission from Qn, a publication of the Yale School of Management http://qn.som.yale.edu]