Across the United States, regional power companies have had (and still have) some degree of monopoly in their respective trading areas. They normally do not compete against one another, there are major barriers to entry in the region of each, and in some ways, they are almost quasi-governmental. Basically, they distribute electricity and natural gas to customers through infrastructure that is aging throughout the country. General sources of their electric power are hydroelectric dams, coal-fired plants and a reducing number of atomic fission plants, among others. They are mostly a regulated industry, though there has been some limited deregulation (with some negative results as California experienced with Enron) as affects their larger customers. Many of the major power companies, besides generating their own power, need more capacity and thus are also buyers of power through independent producers on what is called the “daily spot market”. This includes the principal utilities in California.
There are various alternative sources of power that are complicating the environment for the major power companies—solar, wind power, etc. They can be a source of power to the power companies, but they can get the utilities entangled with requirements to buy power therefrom, or their customers themselves may have the power source (e.g. solar on roofs). Adding to that, it is possible a new energy source could be in the offing, currently estimated as being readied for 2040 (see article, “Inside the Quest for Fusion, Clean Energy’s Holy Grail,” by Lev Grossman, Time Magazine, Oct. 22, 2015), called fusion.
However, the pace of scientific accomplishment can never be predicted, so for purposes of this assignment, we will assume the odds are high that it will arrive between five and ten years from the present…in other words, it is likely a disruptive change to the monopoly utilities is soon coming, but the industry does not know precisely when. This could vastly change the economic foundations and perhaps the existence of these monopolies, since the cost for the power from fusion could be far less than what is paid now for fossil fuels. If this alternative power source comes to pass, the various parties in the industry (1. The major utilities; 2. The current “alternative” power sources—solar, windmills, etc., and 3. The fusion company(ies) themselves) could (or should) devise strategies to lead them into the near and mid-term future. Thus, there are three separate levels of entities that need to do strategies.
To approach this group project, the tools learned thus far can be applied, to understand the industry, its capabilities and the challenge before it.
Provide an array (five) of potential approaches the independent power-generating companies (solar companies, windmill entities) could implement, and the rationale, or aim, of each. Will they likely be forced out of business, or are there alternatives for them?