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GridElectricity sector uncertainty requires new decision-making tools

Published 30 October 2017

Before it was stayed by the U.S. Supreme Court in February 2016, the Clean Power Plan offered state electric utilities and their regulators a degree of certainty as they confronted a rapidly changing market and technology landscape. Although not all agreed with the U.S. Environmental Protection Agency’s approach, the Clean Power Plan’s predictable long-term emissions reduction targets provided clear goals to evaluate investments in traditional generation sources like coal and nuclear energy and resources on the rise like natural gas, wind, solar, and distributed generation.

Before it was stayed by the U.S. Supreme Court in February 2016, the Clean Power Plan offered state electric utilities and their regulators a degree of certainty as they confronted a rapidly changing market and technology landscape. Although not all agreed with the U.S. Environmental Protection Agency’s approach, the Clean Power Plan’s predictable long-term emissions reduction targets provided clear goals to evaluate investments in traditional generation sources like coal and nuclear energy and resources on the rise like natural gas, wind, solar, and distributed generation.

Over roughly the last decade, market upheavals and the technological advances underpinning them have led to a rebalancing of generation sources and to more complex interactions between customers and the electric grid, creating significant uncertainty about existing business and regulatory models. This combination of technology, market, and policy shifts is roiling the electricity sector as never before, sending utilities and regulators on the hunt for new frameworks and tools to support decision making.

Duke says that researchers at Duke University’s Nicholas Institute for Environmental Policy Solutions, having worked with utilities, regulators, and other stakeholders to examine Clean Power Plan compliance options, have developed a deep understanding of both the electricity sector’s potential responses to regulatory, market, and technology changes and the emissions consequences of those responses. Our legal analyses and modeling have provided a solid foundation to help states address their own distinct decision-making challenges amid uncertainty, which has only deepened as the Trump administration looks to roll back Obama-era climate policies.

Demand and nuclear unknowns in the outheast
For utilities and regulators in the Southeast, where utility-led integrated resource plans guide investments, climate policy uncertainty adds to the unknowns about future electricity demand and the role of nuclear energy. Although the region is expected to gain an additional 16 million residents by 2030, electricity demand growth is not inevitable, in part because of increasing energy efficiency and potential growth in behind-the-meter distributed generation. That demand uncertainty adds risk to investments in large, capital-intensive projects like nuclear power. As a supplier of approximately 25 percent of the region’s energy generation, nuclear energy is by far the Southeast’s largest zero-carbon generation source, but its future is unclear because plant operating licenses will expire after 2030, new nuclear plants will take more than a decade to build, and most next-generation plants exist only on paper.