Uncertainties on economy and tech sector to affect energy supply and demand for rest of decade, says report

NEW YORK, Sept. 10, 2001 — Chronic uncertainty about economic conditions and the effects of new technology will complicate the task of projecting energy supply and demand between now and 2010, according to a new report by Deloitte Research.

“Hopes for a technology-driven New Economy have dimmed in recent months, and there’s no agreement among experts on whether the `90s boom will return, or whether we’re moving into a decade like the `70s, with stagflation and big fluctuations in energy demand,” says Dwight Allen of Deloitte Research, who headed the study.

But even if a tech-driven recovery arrives soon, there will still be uncertainty, says Allen: “Some experts contend an Internet-oriented economy would be highly energy-efficient, while others argue it would bring a big surge in consumption.”

This challenges energy companies, since economic conditions and technology affect their spending on infrastructure. Furthermore, new technologies such as a broadband Internet or home-based fuel cells would require new strategies and new ways of doing business.

So what are companies to do? “Utilities and other energy companies need better methods of deciding how heavily to bet on particular services and facilities, methods that foster flexibility in the face of an uncertain business environment,” says Doug Lattner, global director of the Deloitte Consulting energy practice.

Examples are scenario-based planning and real options. “These are approaches that allow a company to `war game’ a variety of scenarios and then launch initiatives aligned with different futures,” Lattner explains. “As events unfold, the company expands some initiatives and abandons others, adapting its strategy to suit the marketplace.”

Traditional planning and valuation methods assume a company will launch a new product or infrastructure project and then see it through to the finish, which is dangerously rigid – especially when the way forward is as unpredictable as it is right now.

“The new Deloitte Research report highlights the importance of strategic flexibility,” says Greg Aliff, managing partner of the Deloitte & Touche U.S. energy practice. “Companies in the energy business need to position themselves not for a specific future – which may not happen – but to excel in the future that actually emerges.”

About the Field Guide to the Future

The new report, Economy and Technology, is Part 4 of The Utility Executive’s Field Guide to the Future. Part 4 is based on survey results as well as 75 subsequent interviews with utility CEOs, power managers in large corporations, government officials, and others around the world. It is also based on an intensive review of economic studies, government reports, opinion surveys, and other sources. Parts 1-3 have all been released, and deal with issues such as deregulation, globalization, energy supplies, and global warming. The full Field Guide series, as well as a 21st Century Utility Retailing report, are now available on one CD-ROM, along with an Executive Summary. Please visit www.dc.com/research.

About Deloitte Research

Deloitte Research, an organization established by Deloitte & Touche and Deloitte Consulting, provides ongoing research and insight into the critical global and industry-specific issues facing business today.

About Deloitte Consulting and Deloitte & Touche

Deloitte Consulting and Deloitte & Touche are part of Deloitte Touche Tohmatsu and deliver assurance and advisory, tax, and management consulting services through nearly 30,000 people in more than 100 U.S. cities. For more information, please visit Deloitte & Touche’s web site at www.us.deloitte.com or Deloitte Consulting’s web site at www.dc.com.

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