US Electricity
Figure 4: US Energy Consumption by Fuel, 1980-2035 (quadrillion Btu)
Figure 5: Energy Prices 1980-2035 (2008 dollars per million Btu)
Sources: AEO 2010, EIA
previously predicted, and natural gas fired electric generation’s share of the market continues to grow through 2035. AEO 2010 forecasts assume that no existing nuclear plants
will retire through 2035, and that owners will apply for, and are granted, new 20 year license extensions beyond the current 40-year period. Further, the AEO 2010 forecast calls for the addition of 8.4 GW of new nuclear generation capacity, plus 4 GW from uprating on existing nuclear plants reaching a total of 112.9 GW in 2035. As previously stated, the expansion of Federal tax credits
for renewable generation and capacity, as well as State RPS programs are the primary market drivers for this surge in the use of renewable fuels. AEO 2010 states, “The share of generation coming from renewable fuels grows from 9% in 2008 to 17% in 2035.”
What Do Electric Utility Executives Think?
What Impact Did the Recession have on Revenues The events of late 2008 and 2009 resulted in considerable demand destruction that will take several years to recover. After years of system expansion and load growth the economic drivers that impact the pace of recovery have changed leading to expectations of a sustained period of reduced load, reduced revenues, increased capacity margins and sharp downturns in the capacity markets. Naturally, these reductions in electricity demand and the associated reductions in energy costs and capacity values have affected most utilities’ revenue. Revenues from industrial customers were the hardest hit followed by commercial, wholesale and, to a lesser degree, residential customers. Total demand reduction has ranged from 3% to 6%. Given that AEO 2010 predicts electricity consumption will increase at an average annual rate of 1% from 2008 to 2035, and absent rate increases, it could be three to six years before revenues return to pre-recession levels. Figure 6 reflects the data collected when respondents to the Black & Veatch survey were asked how the economic downturn affected revenues.
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Sources: AEO 2010, EIA
How Will Electric Utilities Deploy Capital? In the 2010 Strategic Directions survey, respondents were
asked to indicate where they are most likely to deploy capital on technology. The question was asked as follows: “Utilities are investing in a wide array of technology initiatives. Please rate on a scale of 1 to 5 the likelihood that your organization will invest in technology within each of the business areas listed. Then rate where you believe technology will have the most potential positive impact in each of the business areas listed, as with the first column; use a scale of 1 to 5.” In 2010, all utilities indicate the most likely place for their
capital to be deployed will be in ‘maintenance equipment and facilities’ (Figure 7). Although this may at first seem to be a surprise, it should be noted that capital is simply being deployed to the areas where the most potential for positive impact exists. Though the degrees of likelihood varied slightly between investor owned utilities and public power utilities the overall capital priorities were the same. In light of the surge in the popularity of AMI and Smart Grid technologies the survey
Figure 6: How Has The Economic Downturn Affected Your Revenue? (All respondents)
Source: Black & Veatch
worldPower 2010
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