Scenario One - Policy Themes

Scenario Two: Focus on Clean Energy

This is a world in which the economic gloom from the 2008-2010 recession turns around because of effective economic policies and a technological rebound that shows the power of innovation to restructure markets and industries. Initially tough, but ultimately, correct policy changes address the damage done to financial markets from the credit crisis and lead to a properly functioning financial industry that invests in real assets. Some of those real assets are rebuilding and retooling a cleaner, smarter, more energy efficient and flexible energy infrastructure as new environmental policies encourage investment which will support long-term competitive advantages for the nation and states in the WECC region.

Positive developments in the global economy, including growth in trade and further economic expansion in developing nations, benefit the U.S. overall. After an adjustment period, new policies address concerns about climate change and the costs of economic externalities. Investment surges into technological innovations in the energy market and other industries, creating a greener and solid long-term foundation for job growth. However, there is a zigzag nature to this greening change as policies to protect the jobs in and the economic power of fossil fuel industry are also enacted, however with care to address emerging environmental policies. Innovative products shape a more efficient, interconnected, and intelligent business environment. Companies in the power industry are also revising their business models to compete with new entrants and provide new information-intensive services using smart-grid approaches.

With some periods of policy adjustment and adaptation, the WECC region, home to many of the emerging industries shaping the world, leads the transformation to a more environmentally responsible marketplace and enters a new period of long-term growth.

This is a story of persistent long-term change toward a greener and more sustainable power system. However, the path there has some challenges with financial adjustments within the power industry and periods of internally inconsistent national energy policies.

Key Scenario Metrics in 2032:

Cost of Carbon = $100

Policy Adjusted Peak Load Growth Rate* = 1.1% (2032 Ref Case = 1.5%)

Policy Adjusted Demand Growth Rate* = 0.1% (2032 Ref Case = 1.2%)

* Adjusted for known electrification, DSM and energy efficiency policies included in the modeling results

Beginning Years: 2013-2017/Steps Toward Building a Foundation for a Modernized Electric Power System

The big events and issues shaping the electric power sector in the WECC region in early 2012 can be summarized in four key areas: (1) The impact of and recovery from the 2008-2009 credit crunch and follow-on recession; (2) A growing concern among voters and their representatives about both the short-and-long-term effects of climate change; (3) A rapidly emerging concern about the long-term availability and usage of freshwater; (4) The growing investment in renewable energy technologies to meet renewable portfolio standards (RPS); and (5) Assessing how implementation of the recent FERC Order 1000 addressing regional planning might play out.

Taken together, those five issues make players in the electric power industry (investors, developers, regulators, activists and policy makers) anxious about the shape of the business—especially the shape of long-term demand growth and where and how to invest. Investors, including investor-owned utilities, private owners of generation and transmission, and public power companies can envision the emergence of a cleaner, greener and more efficient system. They are wary of over investing and concerned with problems with cost recovery. Regulators want to send the right signals to the market, but are wary of putting rising costs onto consumers who are likely to resist them. Activists and advocates for protection of the environment seek to promote balanced financial and regulatory support in order to sustain and accelerate investment in renewable and clean technologies while mitigating climate change impacts and supporting economic growth (see Figure 2.1 on the growing competitiveness of solar power).

Elected officials and policy makers want guidance on how to enable the emergence of a more flexible and robust energy infrastructure, which will be the basis for long-term economic growth. There are a range of views on how FERC Order 1000 may affect power and transmission investments and cost allocations generally controlled within state bodies. Legislators and regulators face a complex challenge: How to continue progress toward a cleaner, efficient and more sustainable power system without imposing high and escalating energy costs on consumers and industry (see Figure 2.1 below on the increasing cost competitiveness of solar power). Plus, this must be accomplished without damaging economic growth or job creation. Within all of these considerations there is also excitement about the prospect of expanding economic opportunity by seizing a leadership position in the global clean-technology sector. Over time, smart investments in emerging technologies raise the prospect of reducing power cost to customers.