Our global multi-sector survey found that power and utilities respondents were more likely than those of any other sector to report that they faced challenges related to capital-raising.

The top 10 risks for power and utilities companies

1. Significant shifts in the cost/accessibility of capital
   Power and utilities executives were more likely than those in any other sector to report continuing difficulty in accessing capital. This is likely attributable to the sheer scale of the investment needs in the sector.



2. Compliance and regulatory risks
   Traditional regulatory interactions centered on the rate case are being supplemented by often-contradictory pressures regarding environmental impact, efficiency and security of key infrastructure.



3. Political intervention in power and utilities markets
   The impact of politics is increasingly being felt in areas including planning permissions, tariff setting, renewable energy targets, access to fuel supplies and smart grids.



4. Uncertainty in climate policy and carbon pricing
   The objective of lowering carbon emissions from power generation continues to drive the transformation in the industry, but the failure of governments to meet key emissions objectives means that policy is at a crossroads. Market-based approaches to carbon pricing are losing out to direct regulation of emissions.



5. Commodity price volatility
   Commodity price volatility has been extraordinary in recent years and may be here to stay. Volatile prices not only impose short-term losses, they can produce stranded investments.



6. Managing planning and public acceptance risk
   This risk encapsulates citing issues around major infrastructure developments and corporate social responsibility (CSR). Fortunately, the sector is accustomed to the challenges, and power and utilities executives were less likely than those in any other sector to feel that public pressures had risen dramatically in recent years.



7. War for talent
   The war for talent is intensifying, partly because of demographic pressures, and partly because of competition from other sectors. The power and utilities sector must compete with other industries for talent and executives report weaknesses in their staff development programs.



8. Backlash against renewable subsidies
   The expense of renewable energy means it relies heavily on subsidies and, in the event of a public backlash, these subsidies may be removed. Austerity measures in many countries heighten risks.



9. Inefficient use of low-carbon technologies
   Transformation of the industry through the implementation of green technologies — including nuclear energy, renewable energy and carbon capture and storage (CCS) — carries considerable risk. Executives report concerns regarding regulation, innovation and employee skills.



10. Economic shocks and resulting short-term energy demand shocks
    The threat of a double-dip recession is significant and could have a knock-on effect on energy demand, particularly in heavily industrialized countries.

Risks on the radar for power and utilities

Our risk radar is a simple device that allows us to present a snapshot of the top 10 risks in the power and utilities sector as listed above. The radar is divided into four sections that correspond to the Ernst & Young Risk Universe™ model are follows:

• Compliance threats: originate in politics, law, regulation or corporate governance.
• Financial threats: stem from volatility in markets and the real economy.
• Strategic threats: are related to customers, competitors and investors.
• Operational threats: affect the processes, systems, people and overall value chain of a business.

Center of the Radar Risks: those that the industry commentators we interviewed, on average, thought posed the greatest challenge to power and utilities companies in the years ahead.

Arrows: Arrows indicate whether the executives surveyed thought the risk would rise or fall in importance by 2013.

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