Utilities North America

Goals

To understand the outlook, challenges, and regulatory changes impacting the electric utility sector for consultation purposes.

Early Findings

Outlook

  • Overall, the energy utilities sector is expected to decline by 0.4% in 2020 and then remain flat in 2021.

Challenges

  • Over the last 10 years, the U.S. has reduced its energy consumption by 2% compared to a population growth of 6%. As a result, the electric utility sector is facing the challenge of declining energy consumption.
  • Electric utility infrastructure is aging, which is resulting in a "record amount of new capital" having been earmarked to replace and repair equipment, improve reliability, and provide renewable generation. The average age of power lines and transformers is 28 years and generation assets are even older, at an average age of 30 years.
  • Risks from climate-related disasters such as safety lapses and inadequate maintenance having been blamed for at least some California fires, are causing costs to rise. The liability insurance that electric companies will need to purchase to protect themselves against claims is increasing in price as the "risk of property damage and personal injury or death from fires tied to utility equipment has been exacerbated by prolonged droughts fed by climate change."
  • Distributed energy resources are growing rapidly and taking market share from traditional electric companies.

Regulatory Changes

  • A Trump bailout of failing coal and nuclear plants remains a threat to electric companies because of the expected push back from clean energy and environmental groups.
  • Capacity market rule changes are currently under debate in Washington, which, if approved, would benefit the electricity industry. However, the unresolved debates are "contributing to industry anxieties about the future of the fuel mix."
  • Federal rollbacks of "Obama-era rules on carbon, mercury and other pollutants from power plants, regulations on the disposal of toxic coal ash, emission standards for automobiles and methane rules for oil and gas production" have mild support from energy companies.
  • States are expected to push clean energy and climate policies, which will likely reduce the amount of energy used by consumers and affect the amount that can be produced.

Proposed next steps:

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