Electricity sector of the United States

Coal and Gas

Fossil fuels – mainly coal and natural gas – remain the backbone of electricity generation in the U.S., accounting for 68% of installed generation capacity in 2010.

In 2007 the Department of Energy estimated the planned additional capacity for 2008-12 at 92 GW, most of which to be fueled by natural gas (48 GW) and coal (19GW).^[17]

Nuclear power

As of 2007 in the United States, there are 104 commercial nuclear reactors in the US, generating approximately 20% of the nation's total electric energy consumption. For many years, no new nuclear plants have been built in the US. However, since 2005 there has been a renewed interest in nuclear power in the US. This has been facilitated in part by the federal government with the Nuclear Power 2010 Program of 2002.^[18] and the Energy Policy Act.^[19][20] As of March 9, 2009, the U.S. Nuclear Regulatory Commission had received applications for permission to construct 26 new nuclear power reactors^[21] However, as of 2013 most of the new applications had been abandoned due to the low cost of electricity generated with natural gas which had become available at cheap prices due to the boom in hydraulic fracturing; electricity produced using natural gas being 4 cents a kilowatt hour versus 10 cents, or more, for nuclear.^[22]

Renewable energy

The following table summarizes the electrical energy generated by renewable fuel sources for the US. Data was obtained from Electric Power Annual 2016.^[23]

Note: Biomass includes wood and wood derived fuel, landfill gas, biogenic municipal solid waste and other waste biomass.

2016 Profile of US Electric Energy produced by wind power

2016 Profile of US Electric Energy produced by solar power

2016 Profile of US Electric Energy produced by biomass

2016 Profile of US Electric Energy produced by geothermal energy

The development of renewable energy and energy efficiency marks "a new era of energy exploration" in the United States, according to President Barack Obama.^[25] In a joint address to the Congress on February 24, 2009, President Obama called for doubling renewable energy within the next three years.^[26] From the end of 2008 to the end of 2011 renewable energy increased by 35% and from the end of 2008 till the end of 2014, 41.4%.

Renewable energy accounted for more than 14.9 percent of the domestically-produced electric energy used in the United States in 2016, up from 8.82% in 2005. In the past ten years, wind production has increased by 900% (10X) and now provides over 5.49% of US electric requirements. Over this same time period solar has increased by 4400% (45X) and now provides 0.87% of US electric energy needs.

According to a report by the Interior Department, U.S. wind power – including off-shore turbines – could more than meet U.S. electricity needs.^[27] The Department of Energy has said wind power could generate 20% of US electricity by 2030.^[28][29][30]

Several solar thermal power stations, including the new 64 MW Nevada Solar One, have also been built. The largest of these solar thermal power stations is the SEGS group of plants in the Mojave Desert with a total generating capacity of 354 MW, making the system the largest solar plant of any kind in the world.^[31]

Policy and regulation

Policy for the electricity sector in the United States is set by the executive and legislative bodies of the federal government and state governments. Within the executive branch of the federal government the Department of Energy plays a key role. In addition, the Environmental Protection Agency is in charge of environmental regulation and the Federal Trade Commission is in charge of consumer protection and the prevention of anti-competitive practices.

Key federal legislation related to the electricity sector includes:

• the Federal Power Act of 1935 that promoted hydropower and increased the role of the federal government in the sector,
• the National Energy Act of 1978, including the Public Utility Regulatory Policies Act (PURPA), which required utilities to provide residential consumers with energy conservation audits and other services to encourage slower growth of electricity demand, and was intended to promote renewable energy with the result of promoting mainly co-generation;
• the Energy Policy Act of 1992 which provided further incentives for energy efficiency and removed obstacles to wholesale competition; and
• the Energy Independence and Security Act of 2007 which phased out incandescent light bulbs.

Many state governments have been active in promoting renewable energy. For example, in 2007 25 states and the District of Columbia had established renewable portfolio standards (RPS).^[32] There is no federal policy on RPS.

The Federal Energy Regulatory Commission is in charge of regulating interstate electricity sales, wholesale electric rates, and licensing hydropower plants. Rates for electricity distribution are regulated by state-level Public Utilities Commissions or Public Services Commissions.

Deregulation and competition

Deregulation of the electricity sector consists in the introduction of competition and the unbundling of vertically integrated utilities in separate entities in charge of electricity generation, electricity transmission, electricity distribution and commercialization. The deregulation of the electricity sector in the U.S. began with the Energy Policy Act of 1992 which removed obstacles for wholesale competition. In practice, however, regulation has been unevenly introduced between states. It began in earnest only from 1996 onwards when the Federal Energy Regulatory Commission issued orders that required utilities to provide transmission services "on a reasonable and non-discriminatory basis". In some states, such as in California, private utilities were required to sell some of their power plants to prevent concentration of market power.^[33]

As of April 2014, 16 U.S. states - Connecticut, Delaware, Illinois, Maine, Maryland, Massachusetts, Michigan, Montana, New Hampshire, New Jersey, New York, Ohio, Oregon, Pennsylvania, Rhode Island, and Texas - and the District of Columbia have deregulated their electricity markets in some capacity. Additionally, seven states - Arizona, Arkansas, California, Nevada, New Mexico, Virginia, and Wyoming - started electricity deregulation in some capacity but have since suspended deregulation.^[34] The deregulation of the Texas electricity market in 2002 is one of the better-known examples. The result has been that the different states with in United States have a wide spectrum of different levels of deregulation. Some states only allow large commercial customers to choose a different supplier, some allow all consumers to choose. Contrary to the largely similar methods of deregulation for natural gas, different states have taken very different approaches to electricity deregulation.^[35]

Service provision

Electric utilities in the U.S. can be both in charge of electricity generation and electricity distribution. The electricity transmission network is not owned by individual utilities, but by companies and organizations that are obliged to provide indiscriminate access to various suppliers in order to promote competition. In 1996, there were 3,195 electric utilities in the United States and 65 power marketers. Of these, 2,020 were publicly owned (including 10 Federal utilities), 932 were rural electric cooperatives, and 243 were investor-owned utilities. Fewer than 1,000 utilities are engaged in power generation.^[2]

Transmission

Main article: Continental U.S. power transmission grid

There are two major alternating current (AC) power grids in North America, the Eastern Interconnection and the Western Interconnection. Besides this there are two minor power grids in the U.S., the Alaska Interconnection and the Texas Interconnection. The Eastern, Western and Texas Interconnections are tied together at various points with DC interconnects allowing electrical power to be transmitted throughout the contiguous U.S., Canada and parts of Mexico. The transmission grids are operated by transmission system operators (TSOs), not-for profit companies that are typically owned by the utilities in their respective service area, where they coordinate, control and monitor the operation of the electrical power system. TSOs are obliged to provide non-discriminatory transmission access to electricity generators and customers. TSOs can be of two types: Independent System Operators (ISOs) and Regional Transmission Organizations (RTOs). The former operates within a single state and the latter covers wider areas crossing state borders.

In 2009 there were four RTOs in the U.S.:

• ISO New England (ISO-NE, which is an RTO despite its name);
• Midcontinent Independent System Operator;
• PJM Interconnection in the Mid-Atlantic region; and
• Southwest Power Pool (SPP) covering Oklahoma, Kansas and parts of Arkansas, Missouri, Texas and New Mexico.

There are also three ISOs:

• California Independent System Operator (California ISO);
• New York Independent System Operator (NYISO);
• Electric Reliability Council of Texas (ERCOT, an ISO).

The three major and two minor NERC Interconnections, and the nine NERC Regional Reliability Councils.

RTOs are similar, but not identical to the nine Regional Reliability Councils associated in the North American Electric Reliability Corporation (NERC), a non-profit entity that is in charge of improving the reliability and security of the bulk power system in the U.S., Canada and the northern part of Baja California in Mexico. The members of the Regional Reliability Councils include private, public and cooperative utilities, power marketers and final customers. The Regional Reliability Councils are:

• Eastern Interconnection
  • Florida Reliability Coordinating Council (FRCC)
  • Midwest Reliability Organization (MRO)
  • Northeast Power Coordinating Council (NPCC)
  • ReliabilityFirst Corporation (RFC)
  • SERC Reliability Corporation (SERC)
  • Southwest Power Pool (SPP)
• Western Interconnection
  • Western Electricity Coordinating Council (WECC)
• Texas Interconnection
  • Electric Reliability Council of Texas (ERCOT)

The FERC distinguishes between 10 power markets in the U.S., including the seven for which RTOs have been established, well as:

• Northwest
• Southwest (covering Arizona, most of New Mexico and Colorado)
• Southeast^[36]

ISOs and RTOs were established in the 1990s when states and regions established wholesale competition for electricity.

Tariffs and affordability

In 2008 the average electricity tariff in the U.S. was 9.82 cents/kWh, up from 6.9 cents/kWh in 1995. Residential tariffs were somewhat higher at 11.36 cents/kWh, while commercial tariffs stood at 10.28 cents/kWh and industrial tariffs at 7.01 cents/kWh.^[4] The cost of supplying high-voltage power to high-volume industrial customers is lower than the cost of providing low-voltage (110 V) power to residential and commercial customers.

In 2006-07 commercial electricity tariffs in the U.S. (9.28 cents/kWh) were higher than in Australia (7.1 cents/kWh), Canada (6.18 cents/kWh) that relies mainly on hydropower or in France (8.54 cents/kWh) that relies heavily on nuclear power, but lower than in Germany (13.16 cents/kWh), Italy (15.74 cents/kWh) or the UK (11.16 cents/kWh) that all rely to a larger degree on fossil fuels, all compared at purchasing power parity.^[37]

Residential tariffs vary significantly between states from 6.7 cents/kWh in West Virginia to 24.1 cents/kWh in Hawaii. An important factor that influences tariff levels is the mix of energy sources used in power generation. For example, access to cheap federal power from hydropower plants contributes to low electricity tariffs in some states.

Average residential electricity consumption in the U.S. was 936 kWh/month per in 2007, and the average bill was US$100/month. Average residential consumption varies considerably between states from 530 kWh/month in Maine to 1344 kWh/month in Tennessee. Factors that influence residential energy consumption are climate, tariffs and efforts to promote energy conservation.

Revenues

Total revenue from the sale of electricity in 2008 was US$344bn, including US$148bn from residential customers, US$129bn from commercial customers and US$66bn from industrial customers.^[38] Many large industries self-generate electricity and their electricity consumption thus is not included in these figures.

Financing

Most investments in the U.S. electricity sector are financed by private companies through debt and equity. However, some investments are indirectly financed by taxpayers through various subsidies.

Subsidies and tax incentives

There is a large array of subsidies in the U.S. electricity sector ranging from various forms of tax incentives to subsidies for research and development, feed-in tariffs for renewable energy and support to low-income households to pay their electric bills. Some subsidies are available throughout the U.S., while others are only available in some states.

Tax incentives include federal and state tax deductions and tax breaks. Tax incentives can be directed at consumers, such as for the purchase of energy-efficient appliances or for solar energy systems, small wind systems, geothermal heat pumps, and residential fuel cell and microturbine systems.^[39] Tax incentives can also be directed at electricity producers, in particular for renewable energy.

The Low Income Home Energy Assistance Program (LIHEAP) received federal funding of $5.1 billion in Fiscal Year 2009.^[40] It is funded mainly by the federal government through the U.S. Department of Health and Human Services, Administration for Children and Families, and is administered by states and territories. While some of its funding is for fuel for heating, some is also used to cover electricity bills for both heating and cooling.

In April, 2009, 11 U.S. state legislatures were considering adopting feed-in tariffs as a complement to their renewable electricity mandates.^[41]