Unless positive steps are taken to encourage continued development of renewables, the next few years will be difficult ones. Electric utilities are currently in a period of transition from a regulated monopoly structure to a competitive environment, but the precise nature of that evolution, or even the pace of change, remain uncertain. Even after the transition, renewables may still be handicapped in a competitive environment. The risk characteristics of competitive markets will likely reinforce this tendency. For example, investors can reduce their risk exposure by limiting investments to resources whose costs tend to move with the market price of electricity.
Investors can reduce their own risk by investing in gas-fired units.
New renewable investments, on the other hand, will appear risky to investors since their costs are predominantly fixed and thus relatively independent of future market electricity prices. These biases against renewable technologies have raised widespread concern. They have also spawned some promising solutions. The United Kingdom privatized its formerly government-owned electric utility industry via the Electricity Act of 1989. NFFO was created to assure that at least 20 percent of the country's electricity comes from non-fossil sources.