When tackling a problem, engineers bring both skepticism and optimism to the task. As the nation's electric power engineers look to fill America's looming capacity gap, they will need to apply healthy doses of both.
The U.S. Department of Energy's Energy Information Administration (EIA) projects a 50% increase in electricity demand over the next 25 years. Supply must increase to meet it.
Tomorrow's supply, from traditional or nontraditional sources, will likely cost much more than today's. Increased dispatching of renewable energy plants could raise or lower average regional prices, depending on their siting and subsidy. States' only sure way to curb rising costs is to try to reduce demand, by encouraging consumers to participate in utility demand response programs.
Upward pressure on electricity production costs will come from many directions. For example, capital investment in new plants will serve to accelerate the retirement of lower-cost capacity. In traditionally regulated jurisdictions, those assets will be fully depreciated. For new plants, construction costs will be higher due to pricier equipment and material, higher labor costs, and new environmental requirements. The O&M costs of new units will likewise rise with higher salaries for increasingly scarce experienced operators and with skyrocketing fuel and fuel transportation prices.
Demand elasticity in practice
Higher retail electricity prices give consumers more reason to reduce their consumption. If they conserve enough, the drop in total demand could send its own, compensating price signal to wholesale markets.
Whether forced to or not, utilities continue to try to make their ratepayers better-educated energy consumers. Most consumers now realize that changing consumption habits pays off—in the form of a smaller electric bill—and many have changed their behavior accordingly. But even more would follow suit if they had a better idea of how much they would save by reducing their demand.
"Smart" meters will play a key role in helping to close the supply-demand gap. Once deployed, the meters will enable time-of-day pricing. But for the scheme to work, tariffs must become smart, too, by incorporating real-time prices. Regulators can make that happen, just as they can mandate sales of more energy-efficient appliances cumulatively capable of shaving both peak and average demand. The reductions in demand will reduce the size of users' current bills, and future bills as well.
Both the EIA and the International Energy Agency consider "energy efficiency" an alternative to building additional "supply." The lowering of demand will eliminate or delay the need to build new baseload nuclear and clean-coal plants that each cost billions.
Email
Comments
Print
Reuse
