Will The Utility Sector Need A Bailout?The prolonged recession has led to the first reductions in electricity demand in many decades. Our concern is that the uncertainty in the marketplace combined with a maze of government regulations and internal company challenges, could lead to a collapse of the electricity industry that could rival that of Wall Street. Moreover, utilities are being encouraged by regulators to find greener ways to meet customers' energy needs. Yet the demand side of electricity management is unpredictable and most renewable electricity sources have to be backed up by traditional fossil and nuclear power plants. Coal plants are being cancelled in favor of natural gas and nuclear power plants are challenging utility companies due to their large front-end cost.
According to the Energy Information Administration (EIA) electricity output decreased 3.7% last year, the steepest drop since 1938, following a nearly 1% decline in 2008. The downward trend is making it harder for utilities to forecast future power consumption. The EIA expects electricity demand to increase 2.2% this year and 2.5% in 2011. Prerecession levels of annual 2% growth electricity demand growth levels are expected to return by 2013.
Lower energy use is already having an impact on the U.S.'s carbon-dioxide emissions. In 2009, emissions fell by 6.1% to 5.45 billion tons, according to the EIA . Greenhouse-gas emissions are expected to rise 1.5% to 5.53 billion tons in 2010 as a healthier economy lifts industrial demand. A 1.7% increase in greenhouse-gas output is expected in 2011. President Barack Obama has set a goal of cutting greenhouse-gas emissions to 17% below 2005 levels by 2020. The EPA is currently inventorying CO2 emissions. Hopefully, regression analysis and projection methods will be used to establish a reasonable baseline in designing and implementing a national cap-and-trade program. (WSJ, 1/14/10)
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