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Management control, regulation and investment uncertainty in the UK electricity generation market

Management control, regulation and investment uncertainty in the UK electricity generation market

Warren, Elizabeth (2014) Management control, regulation and investment uncertainty in the UK electricity generation market. In: Otley, David and Soin, Kim, (eds.) Management Control and Uncertainty. Palgrave Macmillan, Basingstoke, pp. 193-206. ISBN 978-1-137-39210-7

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Abstract

Introduction

Thus far, this book has directed significant attention toward issues of uncertainty, management control and controls; however, to understand their true complexity, these matters benefit from further examination in the context of real business practices. This chapter will draw on issues discussed elsewhere in this book and explore their relevance within the UK electricity generation industry. Issues, such as the human reaction to uncertainty, as discussed in chapter 5, and how it can be addressed by reducing exposure to it and attempting to benefit from it will be addressed in this chapter. Chapter 13, introduced issues relating to how controls are often introduced when new external regulations emerge within the industry, and this is discussed further by exploring how companies can reject new controls by choosing not to comply and/or by holding back investment. Chapter 4, meanwhile, calls for more research into the practice of strategic decision making in its socio-political, organisational context and how this influences how managers assess the likely risks to a project before approving them; this chapter will examine how in the electricity generation industry it was not risks per se that led to the holding back of approval but rather uncertainties, leading to a push for consultation on a new public policy.

This chapter will consider all of the issues highlighted above, by providing a contextual industry analysis, focusing on uncertainty arising from current and potential future regulations. It will explore how uncertainty critically limited investment in the UK electricity generation market, by examining how energy companies make multi-million pound capital investment decisions in a climate of significant regulatory uncertainty. By examining the increasing environmental regulations in this industry and how energy companies have tried to use predictive models to aid their decision making process the chapter will analyse how new control systems were used to identify weaknesses in both current and future regulations, to avoid uncertainty and also to benefit from it. The latter part of the chapter will show how real options theory was implemented, in many cases by holding back on investment until greater certainty was provided; creating an investment hiatus. Investment decisions provide complex and, in many cases, highly uncertain control issues, as argued by Emmanuel et al (2010); thus any meaningful understanding requires full appreciation of the organisational context. Therefore, this chapter will question the management controls associated with regulatory uncertainty within the UK electricity generation industry by providing a contextual analysis of this industry rather than an in depth theoretical observation of the control systems.

Item Type: Book Section
Uncontrolled Keywords: UK electricity generation, investments, real options, large combustion plant directive, risk, uncertainty
Subjects: H Social Sciences > HD Industries. Land use. Labor
Faculty / Department / Research Group: Faculty of Business
Faculty of Business > Department of Accounting & Finance
Related URLs:
Last Modified: 14 Oct 2016 09:37
Selected for GREAT 2016: None
Selected for GREAT 2017: None
Selected for GREAT 2018: None
URI: http://gala.gre.ac.uk/id/eprint/14809

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