Brattle Group: $1.5 to $2 Trillion Investment Needed in Electric Industry

The US utility industry will have to invest between $1.5 and $2 trillion between 2010 and 2030 to maintain current levels of reliable energy service for customers throughout the country, according to a “Transforming America’s Power Industry: The Investment Challenge 2010–2030,” a report issued by The Brattle Group.

“This study highlights the investment challenges confronting the power industry in the coming decades,” said Peter Fox-Penner, a principal of The Brattle Group. “The industry is facing enormous investment needs during a period of modest growth, high costs and very substantial policy shifts.”

The report concludes all types of new generation capacity will be needed, including natural gas, coal, nuclear and renewables. Nearly 40 gigawatts of new renewable capacity will be needed just to meet state requirements. Significantly, capital spending to upgrade distribution and transmission facilities nationwide may surpass investment in new generation, the study found. Spending on smart grid technologies to ramp up efficiency along with new power lines to integrate renewable electricity sources will account for much of that spending.

“The good news is that, as a result of this very significant investment, our economy and utility customers will get more efficiency and control over their electricity use ... [and a] more resilient and reliable electric grid,” Fox-Penner said.

The report, which follows preliminary results introduced in April 2008 at an Edison Foundation conference, analyzes four possible scenarios that measure the impact of energy-efficiency and demand-response program implementation on investment needs and new plant construction. In the base case scenario, which does not account for new climate policies, the total investment needs are projected to reach $1.5 trillion. Implementation of a federal carbon policy would significantly increase the capital cost and change the mix of new generation capacity, possibly increasing in total capital spending to $2 trillion.

Another key finding in the study is a large potential reduction in the need for new generation capacity, due to the faster than previously estimated implementation of energy-efficiency and demand-response programs. In the preliminary results, energy efficiency was estimated to potentially reduce new capacity by 17 percent. In the final results, the potential reduction in new capacity is projected to be approximately 38 percent. However, reductions in new required capacity will not correlate to an equal reduction in total investment due to the offsetting costs of implementing the efficiency programs.

“It is important to emphasize that, while energy-efficiency and demand-response programs can significantly reduce the need for new generation capacity, they cannot eliminate the need for new power plants,” Fox-Penner said.

View the study at

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