But for James Metcalfe
'91, the global head of the power and utilities group
in investment banking for international investment banking
and wealth management firm UBS, it's just another day at the
"The effects of oil prices going up
or down are muted" for many consumers, he says. "The
U.S. market is looking at oil and feeling an enormous increase
in prices," but a thriving world economy and a weak U.S.
dollar have exaggerated the stateside surge. "Europe
is not feeling it as much because they've seen such a conversion
in dollars to euros."
Metcalfe, previously a managing director
and head of power M&A at Lehman Brothers, joined the Switzerland-based
company in August. "I don't perceive myself to be —
and don't want to be — a manager of managers,"
he says. "I love the client service business and being
involved in deals."
The details of the global power market are
frequently lost on consumers as energy costs rise and fall.
Metcalfe points out that there's a lot more to it than the
change in the price of oil.
"There have been three or four major
thematic shifts that have taken place in the power sector,"
he says. In the 1990s, deregulation was meant to drive down
prices for consumers and generate profits for investors, but
power supply quickly exceeded demand. The 2001 Enron scandal
"led people to believe this business was a lot riskier
than it was" and scared away all but the most daring
investors. In the years immediately following, says Metcalfe,
management teams shifted the focus back to regulated business
models concerned with reliability and cost of services. Today,
funding is easier to come by, but the threat of global warming
has sparked speculation in renewable energy and on a possible
"Right now," adds Metcalfe, "there
are no easy answers."
First, he says, the U.S. government and
the private sector should be asking themselves, "With
higher prices for commodities, can the United States become
more self-sufficient and environmentally friendly?" They
should also consider how best to serve a population accustomed
to cheap, reliable power but often hostile to expanding energy
companies. Almost no one reacts favorably to the news that
a new coal plant is coming to the neighborhood, and lingering
public discomfort with nuclear power can create PR problems
for companies that invest in it.
Some investors have their money on clean,
renewable wind power, but Metcalfe doubts the solution will
be that simple. "Wind power is predictable," he
says, but not like flipping a switch. Statistical models can
predict approximately when wind power will be available, but
the wind won't blow on command.
Wind currently accounts for only 1 percent of electricity
supplied in the U.S., he adds, so wind power alone is not
going to keep America's air conditioners running all summer.
A more sustainable power supply will have to come from a variety
of sources — some more popular than others.
Metcalfe says his Kellogg education prepared
him to approach difficult questions from every possible angle.
"Kellogg has such a unique culture,"
he says, and the school encourages teamwork and a certain
"mental flexibility" that equips students to thrive
in dynamic, high-pressure industries that transcend business
environment, culture and time zone. Metcalfe advises students
interested in global power to pay attention.
"Get ready for change,"
he says. "Be prepared to be mentally flexible."