1. NS4054 Fall Term 2015 U.S. Energy Planning in a Period of Rapid Change

2. Overview Oxford Analytica: “United States: Energy Planning Sees Rapid Change,” August 20, 2015 Overview – number of rapid changes tending to outrun the ability of the system to adjust efficiently DOE has released a report showing the price of utility wind energy has fallen to 2.5 cents per kilowatt hour (kWh) and has comprised one-third of new electrical generation since 2007 However the rise of wind energy – often located in remote locations and variable in its output is a poor fit for U.S. energy infrastructure with needs and production in coming decades The first Quadrennial Energy Review (QER) released in April and outlines administrations approach to the energy mix. 2

3. Rapid Change and Reform I Challenges to reform While US has emerged as emerged as world’s largest producer of oil and natural gas – significant human and institutional challenges to meeting government’s goals. Part of problem is increasing uncertainty in energy: Flat petroleum consumption Declining domestic coal consumption with uncertain export markets in Asia and Europe Growth in retail natural gas, Substantial but still subsidized investments in renewables, and Privately finance growth of distributed generation, such as rooftop solar Are increasing uncertainty and variability within the sector. 3

4. Complexity and interdependence The increasingly intertwined nature of critical infrastructure creates new vulnerabilities for energy security The U.S. has More than 2.6 million miles of pipelines 640,000 miles of high voltage transmission lines 414 natural gas storage facilities 330 ports handling crude refined petroleum; and 140,000 miles of railways that handle source material 4 Rapid Change and Reform II

5. Rapid Changes Resource mix Increased levels of environmental constraints on resource extraction and energy conversion processes Are actively reshaping commodity transport industries, with implications for other transport-heavy industries. With the ongoing shifts in energy resource mix also come new levels of exposure to supply disruption 5 Rapid Change and Reform III

6. Example Natural gas and liquid fuel systems are increasingly dependent on reliable access to energy But natural gas plants are also making up larger portions of the electricity generation pool as coal is phased. Recent cold fronts have demonstrated strong interdependence between electricity and natural gas When more than 30,000 retail natural gas customers experienced an outage, largely due to rolling electricity blackouts impact on gas producers and pipelines. 6 Rapid Change and Reform IV

7. Improvements to Infrastructure Majority of transportation and distribution infrastructure is privately owned and operated, rest owned by the federal ands state governments The highly interconnected nature of the energy system clashes with its highly fragmented regulatory environment where substantial policy occurs at state and local levels 7 Rapid Change and Reform V

8. Business Model Transformation Consumer expectations for energy are shifting rapidly Towards increased consumer control and decentralization These trends challenge existing business models and require new approaches and “smart grid” technologies However new approaches must navigate complex web of relationships between regulators New York Public Service commission’s “Reforming the Energy Vision” one of few documents from a state regulator acknowledging this approach Could lead to significant differences in the energy reliability of states if others lag the leaders by significant margins. 8 Rapid Change and Reform VI

9. Rapid Change and Reform VII Arctic Impact While many energy opportunities opening up Increased melting of permafrost and reduced extent of sea ice creates now logistical challenges for projects in Alaska and Canada U.S. will attempt to leverage its chairmanship of the Arctic Council (2015-2017) to ensure access, exploration and reliable logistics to energy and resourse extraction efforts 9

10. Rapid Change and Reform VIII North American Integration The QER reflected global trends towards increased energy market integration Energy Trade in North America is robust and growing, with more than 140 billion dollars in trade between the United States and Canada and 2013 and 65 billion dollars in trade with Mexico in 2012 Electricity markets in North America among the most integrated energy systems – more than 3 billion dollars traded in 2014 Continuation of the long standing movement towards an integrated North American power system. 10

11. Rapid Change and Reform IX Integration began in January 1963 with the formation of he International North American Power Systems Interconnection Committee (NAPSIC) Sets many industry standards for performance and security that are regularly adopted and enforced by US federal and state authorities. 11

12. Summing Up Shifts in USA energy resource mix are approaching levels unprecedented in recent decades Likely the business models underlying the US energy sector will change faster than regulatory bodies can keep up Will leave many parts of the distribution network overburdened or underfunded. Some states and authorities will move to address them, and in do doing lead to “haves” and “have notes” in terms of energy resilience and adaptation to new production and distribution technology 12