Electricity Policy: Risk-Aware Planning and a New Model for the Utility-Regulator Relationship
This article originally appeared on ElectricityPolicy.com. An excerpt appears below.
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The analytical tools for utilities and regulators to take more explicit account of risk, in an increasingly uncertain world, are at hand. What remains is the need for a more effective way to gauge and reward effective utility performance.
The US electric utility industry has entered what may be the most uncertain, complex and risky period in its history. Several forces are conspiring to make the next two decades especially challenging for electric utilities: large investment requirements, stricter environmental controls, decarbonization, changing energy economics, rapidly evolving technologies and reduced load growth. Navigant Consulting recently observed that “the changes underway in the 21st century electric power sector create a level and complexity of risks that is perhaps unprecedented in the industry’s history.”