The Power Equation

In the spring of 2026 the energy industry was reminded, twice, what it sells. After US–Israeli strikes on Iran at the end of February, traffic through the Strait of Hormuz was effectively halted from early March, QatarEnergy declared force majeure on its liquefied natural gas, and Brent crude rose above $115 a barrel in March, reaching a reported high of $126.41 on 30 April. Producers whose oil could reach the sea by another route were suddenly worth more than producers with cheaper barrels and no way out. At the same time, in the United States, the grid operator for thirteen states and Washington, D.C., was paying about $329 per megawatt-day for capacity in 2026/27, against about $29 two years earlier, because technology companies building data centres needed power that could run every hour and a connection to deliver it. Owners of old nuclear plants signed twenty-year contracts with Microsoft, Amazon and Meta. Some of the industry's money in those years created more value, for more people, than almost any other business: the price of a battery pack fell by about nine-tenths between 2010 and 2025, and that of a solar module by more. Much of it was destroyed: two nuclear units in Georgia that cost about $35 billion and came in seven years late, offshore wind farms cancelled after their contracts were signed, a European battery champion that raised more than $13 billion and went bankrupt, and a week of Texas winter that left a co-operative with a power bill several times its annual revenue.

The difference is rarely the quality of the resource or the engineering. This book argues that an energy company creates durable value only when four things are true at once, and that the factors multiply rather than add: if any is zero, the result is zero. It must have supply at a cost the market will pay, a resource, plant, machine or service that delivers energy, or the equipment for it, below the price buyers will pay across the cycle, not just at the top of it. It must have a route to market, an offtake contract, pipeline, grid connection, rate base or customer base that turns production into revenue, because stranded supply is worth nothing. It must have capital matched to the asset, financing whose cost, term and structure fit an asset that is paid for up front and earns over decades, strong enough to survive the low point of the cycle. And it must hold a licence to operate, the permits, regulatory approvals, safety record and public consent that let it build and keep running. Around those four factors sit two forces that no company controls, commodity prices and politics, from OPEC+ quotas and wars to tax credits granted and withdrawn, which behave like weather: they do not decide whether a project is sound, but they decide how long an unsound one survives, and they can bankrupt a sound one financed for fair weather only. Most of the failures in this book come from treating one factor as proven because another was: cheap capital mistaken for low cost, a subsidy mistaken for a market, a licence mistaken for permanent.

The twenty-five chapters develop that view in seven parts. Part I explains why energy is not just a commodity, how it became a business from Titusville and Pearl Street to the Seven Sisters and Enron, how the money from one barrel and one kilowatt-hour is divided along the chain, and why reserves and capacity figures are weaker evidence than they look. Part II follows the markets one by one: oil and gas, LNG and pipelines, utilities and grids, wholesale power markets, solar and wind, batteries and electric vehicles, and nuclear. Part III examines what it takes to build things that work: the economics of a power plant, offtake contracts, project finance and the cost of capital, trading and risk, distributed energy and the customer, and safety. Part IV covers the capital cycle, policy and subsidy from the Inflation Reduction Act to its 2025 rollback, geopolitics and energy security, the transition bet, and energy in emerging markets, Africa above all. Part V turns to people: leadership, culture and capital allocation, and how to build an energy company. Part VI reads five cases for the decisions behind them, and the Practical Reference supplies worked examples, checklists, a glossary and a guide to the evidence. Each chapter opens with a documented case, explains the mechanics it illustrates, works one stylized example and closes by naming the factor of the equation on which its case turned.