Our nation’s electricity system is undergoing a rapid transformation. Market forces, driven by public demand for cleaner, more efficient energy, and technological innovation are redefining America’s power sector. These trends will change the electricity system and utility businesses at their core. But our century-old legal, economic, and regulatory structures are thwarting innovation. Decisions and investments made in the next decade will shape the course of the power sector, the economy and public health for decades to come.

A series of new pressures are hammering America’s utilities:

  • Electricity demand is no longer growing, and can no longer be relied upon for the revenue required for future power system investments. This is due in large part to decades of success in energy efficiency programs and standards.
  • Aging grid infrastructure needs replacement. Moreover, extreme weather events are becoming more frequent, and current infrastructure is not adequately resilient.
  • Environmental standards like the mercury and air toxics rules and the EPA’s Clean Power Plan are forcing a fresh look at grid planning.
  • Competition has been continuing to grow since many regions underwent the market restructuring of the 90s, and new players are entering the market:
    • The cost of new energy technologies has come down much faster than predicted. Solar and storage costs have dropped 80% over the past five years, and wind has cut in half.
    • Demand response has the power to turn our nation’s 100 million buildings into a network of thermal batteries.
    • Other new technologies are racing into the system at all points from centralized generation down through the distribution system

When considered together, these pressures cry out for a set of new solutions that America’s Power Plan seeks to provide.

There is a silver lining: experience and technical expertise across the world is demonstrating that it is easier to integrate much higher shares of renewables and efficiency more rapidly than previously thought (see System Optimization Resources). New technologies offer great promise to increase reliability, reduce fuel costs, minimize capital investment, and reduce environmental damage. In order to unlock these solutions, however, regulatory and institutional reforms are imperative. Capturing these benefits requires a new approach to utility regulation and business models—no matter if the power system is driven by a vertically integrated monopoly, by a competitive market, or by a hybrid of the two.