California energy crisis likely to linger until 2003 or 2004, energy entrepreneurs say

WAYNE, Pa., July 31, 2001 – The California energy crisis is unlikely to be resolved before 2003 and could drag on for a year or more after that, according to a majority of energy entrepreneurs, executives and investors surveyed at the annual EnerTech Forum held in Aspen, Colorado, earlier this month.

Sixty percent of respondents said the energy crisis in California would be resolved by the summer of 2003 or 2004, while only six percent said it would be resolved this year. Eighteen percent said it would be settled by this time next year.

One hundred sixty-two participants attended the EnerTech Forum, an annual gathering of energy, telecommunications and technology leaders; 81 participated in the survey on a range of energy- and telecommunications- related issues.

The most significant outcome of the California energy crisis is expected to be an acceleration in the deployment of distributed generation technologies, followed closely by a major slowdown in the process of energy deregulation, survey respondents said.

Distributed generation technologies refer to devices located at a customer site that generate electricity. Examples include micro-turbines, fuel cells and photo-voltaic devices.

EnerTech Capital co-founder and Managing Director Scott Ungerer said the survey results clearly show the group’s bias toward entrepreneurial solutions and a marketplace that favors competition.

“Most of the survey participants are energy, telecom or technology entrepreneurs, or investors who are focused on these sectors,” he said. “The findings of this survey reveal this group’s preference for solving complex problems with creative, entrepreneurial approaches and unfettered market competition.

“These executives do not believe the California situation is one that will be easily or quickly resolved. In fact, most of them believe the crisis in California will have a chilling effect on the progress that has been made in the regulatory arena.”

When asked which factor was most critical for a truly competitive energy market for end-use customers, respondents overwhelmingly selected “access to real-time pricing information.”

“Respondents are clearly making their case for a market that will reward energy providers with access to pricing information, which, in turn, will encourage competitive responses to energy needs,” said Ungerer.

The executives also said facility usage and analytical tools were important to achieving a competitive energy market. These tools, including sophisticated, Internet-based, real-time energy information systems, allow end-use customers to fully understand their energy consumption patterns and then provide them with the ability to evaluate and make both short- and long- term energy decisions.

When asked which factors would play the most important role in reshaping the energy industry, respondents ranked “entrepreneurial entrants & new technologies” first in order of importance. Following closely behind was the “consolidation of incumbent industry players.” Respondents gave less importance to the “globalization of the energy industry,” the “U.S. energy policy” and “e-business applications.”

“Those attending the Forum represent a segment of the industry that holds the key to future energy solutions,” said David Lincoln, Managing Director of EnerTech. “They are precisely the types of entrepreneurial companies that the Bush Administration has been touting as emerging problem-solvers to the energy dilemma. In the midst of all the change rocking the energy industry, Forum participants believe they will equalize supply and demand through entrepreneurism.”

Energy information systems and micro-turbines will emerge as the two most critical technologies in the next five years, survey participants said. Of much less appeal in that timeframe were fuel cells, alternative fuels and photo-voltaic technologies.

But when respondents were asked to select which technologies would prevail ten years down the road, fuel cells led the list, followed by alternative fuels and photo-voltaic technologies.

Fuel cells convert the chemical energy of a fuel into electricity, while photo-voltaic technologies convert light into electricity. “While both are in limited use now, it is apparent that respondents believe that newer technologies will eventually replace conventional technologies as they develop more competitive price points,” said Lincoln.

On the communications front, 64 percent of participants predicted that broadband wireless and optical networks will be in widespread use five years from now. More than a third also predicted that in-home powerline carriers would be popular.

The EnerTech Forum is an annual gathering of top-level utility and energy executives, entrepreneurs, management consultants and investment bankers. It is sponsored by EnerTech Capital (http://www.enertechcapital.com), a $285 million private equity firm specializing in investment opportunities emerging from the deregulation and reshaping of the energy and telecommunications industries. EnerTech is headquartered in suburban Philadelphia.

Co-sponsors of the Forum were: Accenture, Ernst & Young, Orcom and Enerwise Global Technologies. This year, 162 attendees from around the world attended the Forum.

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