Introducing The GF Energy 2006 Electricity Outlook
What’s the new electricity industry gestalt—the industry’s essence and spirit; the coherent dynamic that drives most of North America’s utilities? This year’s survey results speak loud and clear about a consensus-driven future.
It is a picture of the present superficially much like the past with a vigorous commitment to building generation and retaining customers, a newly revived tie that binds investor-owned, public and cooperative utilities. It is the belief that business as-once-was-usual is resuming until further notice with competition relegated to wholesale transactions in certain markets. It is really a picture of an industry getting back to business and moving away from its decade-long arguments over business models.
More important, it is a picture of a future where climate change, real-time energy management and, perforce, far more customer intimacy will rule. A decade from now demand response will flow as fast as electricity does today. And if the industry is right, today’s utilities will be leading digital players. The changes that the industry itself pictures are more transformational than in any year since we began surveying the industry in 1992.
The current sentiment is driven by today’s fuel costs which provide the opportunity for utilities to forge new bargains with state regulators that arbitrage higher rates for longer-term commitments. It is driven by the need to expand, with few short-term levers to manage demand response, long-term supply decisions are where the action is in most markets.
The evidence of a strong consensus is stark. Among all the consensus views, the most robust findings of this year’s survey of senior executives of US and Canadian utilities are that:
- 93% do not expect new entrants in the retail markets in the next 10 years
- 89% expect utilities to become involved in end-user demand control and management in the next 10 years
- 88% expect more assets to be built in ratebase
- 85% anticipate a resurgence of the concept of the traditional utility having an obligation to serve and to ensure resource adequacy
Along with the expectation that there will continue to be problems in siting new transmission and that significant action will be needed to deal with climate change, putting North America’s utilities firmly in control again is a shared expectation among cooperatives, investor-owned and public utilities. And they will be in command of an industry that may be even more supply-side driven, particularly by integrated companies that make, deliver and sell electricity to their customers.
After a recent past characterized by fear, whether of new entrants, of each other, of being driven over the edge by competition, or of living in the fast and loose market lane, there is a definite sense that utilities—and using that ancient word to describe them says a lot in itself—are in charge again.
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