$1.5-to-$2 TRILLION FOR ENOUGH ENERGY IN 2030 – BRATTLE GROUP

From Transforming America’s Power Industry: The Investment Challenge 2010-2030: “The U.S. electric utility industry faces the greatest challenge in its history.”

How’s that for high drama? Grabs the attention, doesn’t it?

But it’s not really news. The point is pretty basic: Demand for electricity is increasing and is not likely to significantly stop increasing for the foreseeable future. And demand for the commodities needed to build new infrastructure to meet electricity demand is increasing, too.

Conclusion: Electricity is likely to get more expensive.

Note: The Edison Electric Institute, the report's sponsors, represent big utilities, many that are heavily invested in coal and nuclear and some that still disdain New Energy.

So, OK, how MUCH more expensive will electricity get?

The Edison Electric Institute asked the researchers at The Brattle Group to figure out how much it will cost to “…maintain today’s high levels of reliable electric service across the United States through 2030.”

The answer: It depends.

On what? On 3 crucial things that will affect a lot of other things: (1) The impacts of climate change, (2) the type of energy infrastructure built and (3) the applications of “smart” technology (energy efficiency, EE, and demand response, DR) used to implement efficiency measures.

The 3rd is especially interesting because it figures so prominently in this report and yet has only begun to get widespread attention.

From Transforming America’s Power Industry: The Investment Challenge 2010-2030: “Concerns about global climate change and other environmental issues have created a new industry emphasis on more energy-efficient products and services and low-emission generation sources. New distribution end-use technologies, such as advanced automation and communications and plug-in hybrid electric vehicles (PHEVs), will dramatically change how utilities deliver electricity and how customers use it, allowing new efficiencies and greater customization of electric service.”

Technical point: The best case scenario (not considered very likely by Brattle because too many good, practical things would have to come together like climate change legislation, a smarter grid and more efficient consmers) includes the Electric Power Research Institute (EPRI) Prism Analysis, a fascinating and sophisticated summary and analysis of the many factors that can and will affect greenhouse gas emissions and global climate change.

The truth: Many studies foresee electricity getting more affordable once the New Energy infrastructure the nation and the world so urgently need is in place.

Executive Summary

No wonder it's so expensive: Look at all that nuclear and coal they want to use. (click to enlarge)

The Brattle Group Projects $1.5 to $2.0 Trillion Investment Needed in the U.S. Electric Utility Industry by 2030
November 10, 2008 (The Brattle Group)

WHO
The Brattle Group authors (Marc W. Chupka, Robert Earle, Peter Fox Penner, Ryan Hledik); Energy Information Administration (EIA) of theU.S. Department of Energy (DOE); Electric Power Research Institute (EPRI)

WHAT
Transforming America’s Power Industry: The Investment Challenge 2010-2030
lays out 4 scenarios for energy development over the coming 2 decades and predicts the kind of energy and cost for that energy in each scenario to maintain present levels of reliable electric service.

Best case scenario, though not most likely, because it underestimates the power of New Energy and Energy Efficiency. (click to enlarge)

WHEN
2010-2030

WHERE
- In (1) Reference Scenario, similar to the EIA/DOE Annual Energy Outlook (AEO) but adjusted for higher fuel and construction costs (a modeling benchmark/ starting point) the impacts of (a) new federal policy to cut emissions and (b) new energy efficiency (EE) and demand response (DR) programs. Neither a “base” or “most likely” scenario.
- In (2) RAP Efficiency Base Case Scenario, the impact of “realistically achievable potential” (RAP) EE/DR programs is included but not a national emissions reduction policy. It is considered the “most likely” scenario. It includes (a) likely customer behavior and (b) market, financial, political, and regulatory barriers to savings with EE/DR programs.
- In (3) MAP Efficiency Scenario, the impact of “maximum achievable potential” (MAP) for EE/DR programs (greatest customer participation) in EE/DR programs but not a national emissions reduction policy.
- In (4) Prism RAP Scenario, the impacts of a RAP EE/DR program and a national emissions reduction policy are included.

WHY
- The total cost calculated under each scenario was reduced by the investment that could be avoided through the implementation of energy efficiency and demand response (EE/DR) programs.
- The Prism RAP scenario uses the cost of EPRI’s Prism Analysis projections (Impacts and Benefits) for generation investments (in nuclear, advanced coal, New Energy and other energies) that will reduce the growth in emissions.
- Key findings
(1) By 2030, the electric utility industry will require a $1.5 trillion to $2.0 trillion investment to continue operating at today’s standards.
(2) Under the Reference Scenario, 214 gigawatts (GW) of new generation is added by 2030, at a cost of $697 billion.
(3) EE/DR programs can significantly reduce, but not eliminate, the need for new generation.
(4) Using EE/DR to cut generation requirements does not mean an equal cut in total cost because EE/DR programs have costs.
(5) All types of generation are needed.
(6) Implementation of a national emissions cutting policy will significantly increase costs and change the types of energies in the new generation.
(7) Needed transmission and distribution costs could be as high, or higher, than the costs of new generation.

The same old story: New Energy needs new transmission. (click to enlarge)

QUOTES
- Report: “No matter which scenario is implemented, total utility industry investment needs will range from approximately $1.5 trillion to $2.0 trillion by 2030.”
- Report: “It is important to recognize that total investment amounts are not the same as revenue requirements, rate levels, or societal costs. As a result, one cannot directly link higher investment costs with specific rate changes until fuel costs and other operating expenses are considered…”
- Report: “Affordable, reliable electricity is as essential to the global economy of the 21st century as it was to the American economy of the 20th century. The U.S. electric utility industry is capable of rising to this enormous investment challenge, but implementation of appropriate policies will be an essential ingredient for success.”