Middle Years: 2018-2022/Struggling to Get on Track

Final Years: 2023-2033/Same as it Ever Was

Global financial markets remain dangerous for power companies seeking investment capital as interconnected, sophisticated, and fast-trading capital markets appear difficult to navigate. Country-level banking crises continue since international standards remain elusive and largely unenforceable. Derivative-based instruments make financial markets appear unstable and opaque despite attempts by federal regulators to prevent abuse. Stable and coordinated economic growth in the global economy exists for short periods, though there is little continuity.

Because of both reliability requirements and compliance concerns, utilities must ensure that transmission is not underutilized. Generally speaking, there’s now more situational awareness within the grid. For regulators, a persistent fear of a cyber attack on the grid encourages focused public investment in technologies that enhance this grid knowledge. There’s also an increased adoption of load-shifting and demand response enabled by the smart grid and driven by the integration of renewables. Utilities are pushed to increase coordination and centralize management of the power grid. Eventually, this leads to the voluntary formation of an Energy Imbalance Market.

There are now fewer major players in the traditional electric power sector. Large areas of the grid have been consolidated large areas via mergers. Large investment holding companies also play a big role as they can manage risk across large portfolios. Public power companies remain, but, in many cases, have merged into regional-scale organizations focused on reducing costs. Foreign owners hold some renewable power companies through significant equity investments. None of this matters much to the average consumer since they view the industry as rather unglamorous and staid. Unit prices for power are higher, but usage, in most instances, remains either lower or manageable and is of little concern to most consumers.

Power prices continue in a stable zone with small but predictable increases, but the focus on short-term costs has run its course. Deferred maintenance and failure to invest in infrastructure that would have improved long-term cost reduction opportunities now come to a head. Consumers face the situation of accepting increased bills to finance long-term investment or permanently damaging U.S. competitiveness in the world market.

The off-grid or informal power sector offers some interesting, though uncomplicated, lessons. Distributed generation models shift risks and slowly increase customer participation. These models consist of using proven and reliable distributed generation systems in isolated grids that have well-engineered back-up systems. DG users are positioned in activities—small office parks and vacation properties—where short-term outages do not have catastrophic impacts. DG systems now compete on a cost basis with grid-connected power.

Fossil fuel use in the energy sector, including electric power and transportation, is proportionately lower than two decades earlier. The growing usage of hybrid-electric vehicles in the automotive market leads to a fall in gasoline demand. Legislators continue to use energy policy as a means of stimulating state economies. They mandate energy efficiency measures and demand response.

Coal-fired generation has shrunk to a smaller share of U.S. power generation, especially in the WECC region, as natural gas and renewables enlarge their market shares. The more noticeable capital investments in the industry are in the few large power systems (some wind, some natural gas, and some solar-powered) replacing retired coal plants. In many cases, the plants have been built on the old coal plant sites to make use of existing transmission connections.

With the stability of operations in the power sector, state leaders call for a pullback of federal regulation to allow states to manage their power systems illustrate the emergent belief that there can be regional cooperation without a federal role. State regulators continue to balance cost versus reliability as utilities desire the most efficient ways to meet service requirements. Only those stakeholders suggesting a nationalized power grid see the need for a substantial and continuing federal role. Increased coordination among balancing authorities is starting to happen.

During these years American society is in the midst of retooling and reinvesting in its people resources. The failure to invest during the previous decade coupled with the deferral of essential maintenance can no longer be ignored. Significant investment is needed to keep the West competitive. Long-term high unemployment is on the decline as local and national government policies support re-educating people for the jobs of the future. The value of taking personal responsibility for one's life and the environment shared by all is influencing policies in many areas. Local solutions to many problems are highly valued.

Public pressure on the power sector continues to come from advocates and activists concerned about the long-term impacts of climate change. The U.S. remains a leading global emitter of greenhouse gases due to industry and the continued use of natural gas in the power generation sector. A much larger biofuels sector faces scrutiny as full life-cycle analyses start to question the sector’s purported carbon neutrality and overall impact on water usage.

Investors in the remaining coal-fired and gas-fired plants consistently highlight the low cost of fossil fuel generation as well as the use of the best available technologies that result in less air pollution (see Figure 3.2 below on long term progress in making coal less polluting). They also point out that lower power costs support economic growth and help the U.S. and Canada maintain energy-intensive industries like automobile manufacturing, which is returning to North America from BRIC⁶ countries because of rising energy costs globally.