Michael Giberson
Rebecca Smith reports in the WSJ:
An unexpected drop in U.S. electricity consumption has utility companies worried that the trend isn’t a byproduct of the economic downturn, and could reflect a permanent shift in consumption that will require sweeping change in their industry….
The data are early and incomplete, but if the trend persists, it could ripple through companies’ earnings and compel major changes in the way utilities run their businesses. Utilities are expected to invest $1.5 trillion to $2 trillion by 2030 to modernize their electric systems and meet future needs, according to an industry-funded study by the Brattle Group. However, if electricity demand is flat or even declining, utilities must either make significant adjustments to their investment plans or run the risk of building too much capacity. That could end up burdening customers and shareholders with needless expenses.
The $1.5-2.0 Trillion figure is wild hyperbole, especially when you consider that from the beginning of time to now, about $0.75T has been spent on the Generation-Transmission-Distribution complex in North America.
But you are right in that this warrants further investigation. How much of the decline is industrial versus residential, and so on.
Improvements in construction techniques and increases in insulation levels have made the ASHRAE heating and cooling degree day calculations progressively less relevant over several decades. Rising electricity prices, combined with a softening economy, have encouraged increased reliance on ventilation when temperatures are milder, as they have been in much of the country this late summer and fall.
The greater risk, if the new Administration and Congress actually embark on an 80% reduction in CO2 emissions by 2050, is that electric utilities will not have built sufficient capacity, since smaller direct users of fossil fuels will switch to electric end use equipment, thus shifting the CO2 reduction burden to the electric utilities. That switch, combined with a projected 50% increase in population over the period, translates to an 87% reduction from projected 2050 CO2 emissions. The adoption of plug hybrid electric vehicles, even if recharged largely off-peak, will further add to electric demand.
barryp: i’m guessing that $0.75T is in nominal dollars? What is it in inflation adjusted dollars? Replacement value?
barry p.,
The estimated investment in a new 1 GW nuclear power plant is ~$6 billion. Based on current population projections, the US would need to add ~200 such plants, or their equivalent, by 2030. That suggests an incremental investment of ~$1.2 trillion. If the incoming Administration proceeds with CO2 reductions, approximately 30% of the existing ~700 GW of fossil fueled genertion would also have to be replaced, absent technology to capture and permanently sequester the CO2. That would require the investment of another ~$1.2 trillion.
A combination of solar and wind generation might be used instead of nuclear for a portion of this generation capacity. However, in either case, the installed generation capacity would need to be 4-5 times the installed nuclear capacity, to account for the lower capacity factors of solar and wind (~25% CF) and losses into and out of storage. The cost of such systems is unknown and unknowable, since the requisite storage technology does not yet exist. However, for example, the installed cost of current technology wind turbines is ~$1.5 billion per GW of capacity (@25% CF), or approximately $7.5 billion plus storage to replace a 1 GW nuclear plant.
Thus, hardly “wild hyperbole”.
Ed:
Your scenario (200 nuke plants by 2030) is very far above the upper bounds of any reasonable assumption. Nobody I know inside the generation biz is using numbers anywhere near that high.
Even using the most aggressive demand growth assumptions, the models I use have nowhere near that many plants being built by 2033 (the end of my forecasting window), and most of those being built will likely be gas (or coal, when people see what 7×24 gas-fired power costs).
“In its Annual Energy Outlook 2007, the U.S. Energy Information Administration (EIA) estimates that U.S. electricity demand will grow by 39% from 2005 to 2030, reaching 5.8 billion megawatt-hours (MWh) by 2030. To meet 20% of that demand,
U.S. wind power capacity would have to reach more than 300 gigawatts (GW) or more than 300,000 megawatts (MW). This growth represents an increase of more than 290 GW within 23 years.”
Source:20% Wind Energy by 2030, US DOE