If the economy picks up as expected, we might have shortages in our electricity supply by the end of the decade--simply because we won't have enough power plants to make enough power. The effects of declining capacity, including so-called brownouts and blackouts in densely populated, energy-intensive areas such as the East Coast, could appear even sooner.
These concerns are not new among energy analysts. CR reported nearly three years ago that a leading power-supply forecaster predicted "power shortages and blackouts would be |unavoidable' along areas of the East Coast and more likely throughout the rest of the country within the next two years."
The slow economy since the appears to have reduced the rate of increase in demand for power over the past couple of years.
The problem, according to energy consultant John Sillin, is that as the economy grows again, so does demand for electricity (usually at a somewhat faster pace). But utilities won't be able to keep up with rising demand due to various aspects of utility regulation that have dampened the production of electric power in recent years.
"The principal reason for this is that economic regulation of electric utilities has become so perverse that they are discouraged, indeed they are penalized for making investments that are in the long-term best interest of their customers and the nation at large," Sillin writes in the fall issue of NWI Resource, a publication of the National Wilderness Institute. "Over the past 15 years utilities have been forced to write off some $12 billion in new plants."
A number of factors will contribute to a rebound in electricity demand: environmental regulations, which will make use of electricity more attractive than other sources of energy; declining electricity prices, which have already dropped 24% relative to inflation since 1982; and a growing population with higher real incomes will increase demand for more homes "loaded with electricity-consuming devices such as refrigerators and heaters."
Sillin estimates that if the economy picks up to a level of growth equivalent to what has been the the norm over the past 20 years and averages "2.5% for the remainder of the 1990s (it's averaged 2.7% since 1970), electricity demand would grow at a rate of 3.8%--double the rate that electric utilities and the U.S. Department of Energy are presently …