Geoscience Reference
In-Depth Information
an interesting time for analysts in the electric utility industry and in the public
policy environment in which the industry operated as outlined in the introduction of
the OTA assessment report:
During the 1970s, the environment within which utilities made investment decisions
changed from a relatively predictable continuation of past trends to a highly uncertain
and complicated maze of interrelated financial, regulatory, and technology considerations.
As electric utilities face the 1990s, the experiences of the 1970s have made them much
more wary of the financial risk of guessing wrong and overcommitting to large central
station coal and nuclear plants. At the same time, the possibility of being unable to meet
electricity demand exists, causing growing concern among utilities as the next decade
approaches.
As a result, utilities are now taking steps to enhance their flexibility in accommodating
future uncertainties. In addition to continued and primary reliance on conventional
technologies, supplemented by coal combustion technology enhancements to reduce pol-
lution emissions and increase efficiency, utilities are considering a variety of less traditional
options. These include life extension and rehabilitation of existing generating facilities,
increased purchases from and shared construction programs with other utilities, diversifi-
cation to nontraditional lines of business, increased reliance on less capital-expensive
options such as load management and conservation, and smaller scale power production
from a variety of conventional and alternative energy sources. Such options offer utilities
the prospects of more rapid response to demand fluctuations than traditional, central station
power plants. (Office of Technology Assessment
1985
,p.1)
A key feature of the time was that uncertainty dominated the electric utility
decision-making environment of 1980s. Historical projections of electricity
demand were shown to be consistently wrong for the previous decade, consistently
underestimating the impacts of energy efficiency improvements brought about
by higher electricity prices—growth projections fell from nearly 8 % annually in
1974 to 2 % in 1985. The renewable power industry was in its infancy following
passage of the Public Utility Regulatory Policies Act of 1978 (PURPA) and
implementation of a federal renewable energy tax credit and similar credits in a
number of states. At that time natural gas had been declared a premium fuel
reserved for home heating and precluded from use in electric power generation
with the Powerplant and Industrial Fuel Use Act of 1978 (PIFUA), which seems
particularly ironic now given the shale gas boom in the United States in the last
several years. Electric utility stock values and bond ratings had fallen precipitously
as rate increases proposed by utilities around the country were being challenged by
state public utility commissions as based on imprudent investments in unneeded
power generating capacity—mostly large central station nuclear power and coal-
fired generation facilities.
Major amendments in 1977 to the 1970 Clean Air Act were also especially
influential in shaping policy at the time. They added provisions for the Prevention
of Significant Deterioration (PSD) of air quality in areas attaining the National
Ambient Air Quality Standards (NAAQS) in addition to new requirements on
pollution sources (including especially power plants) in so-called non-attainment
areas for NAAQS—geographic areas that did not meet one or more of the federal
air quality standards. These new provisions established major new permit review
requirements that injected considerable uncertainty in the future of coal-fired power
