Saturday, January 16, 2010


Electricity: Declining Supply and Demand

Although many countries have chronic electric power shortages that handicap their economies, industrialized countries are seldom mentioned in that respect, and we tend to think that they face no significant problems. And so it is with the Korean peninsula: Most people know that the North is an energy basket case, but assume the South has plenty of spare capacity. So an opinion piece in The Korea Times with the shockingly ominous title “Looming Power Blackout” will certainly surprise many.

Even in rich countries, however, ballooning capital costs are a drag on the growth of generating capacity, and keeping up with projected rising demand is a challenge. Some countries, such as the US, need to overhaul and upgrade their grids, which is another big expense. And because of the crumbling US economy and attendant decline in energy demand, power production has sustained its biggest drop since 1938. That means less capital to invest in new capacity, and less incentive to do so.

Thus, the power crunch isn’t limited to just developing countries. Watch for more discouraging developments in this area as the global economy continues to deteriorate.

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