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What happens if consumers lose confidence in the electricity industry?

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By illuminem briefings 🌎

· 2 min read


illuminem summarizes for you the essential news of the day. Read the full piece here in Oil Price or enjoy below

🗞️ Driving the news: Banking and the electricity industry, particularly in the United States, are considered to be confidence games due to their financial models
• Both industries rely heavily on the assurance of their stakeholders, with potential imbalances between their short-term obligations and long-term assets posing risks

🔭 The context: Banks use short-term deposits to fund long-term loans, much like how electricity utilities make long-term investments to serve customers who pay monthly without a lifetime service commitment

🌎 Why does it matter for the planet: The potential disruption of these financial models can impact the stability and reliability of services that are vital for society, such as the supply of electricity
• This could also affect the pace and effectiveness of the transition towards cleaner energy alternatives, which is crucial for mitigating climate change

⏭️ What's next: The government may need to provide assurance to these industries, particularly for utilities, in a manner similar to the banking industry

💬 One quote: "Like banks, utilities also have a mismatch between long-term assets and short-term obligations. If, at any point, utility investors lose confidence in the industry, it will very quickly have difficulty continuing its financing processes." (Leonard S.Hyman, economist and financial analyst)

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