The Math Does Not Lie: Factoring the future of the U.S. electric power industry
Factoring the future of the U.S. electric power industry
What will the U.S. electric power industry look like in the future? This question has been asked numerous times with many different answers, and current industry trends make it an especially relevant question today. Discussions with senior electric power company executives suggest a lot has changed over the last four years that is challenging the conventional wisdom about where the industry may be heading. Recent Deloitte research supports these executives’ views, and highlights important emerging trends which suggest power and utility companies reassess their business strategies and explore new business models.
This paper examines what has changed in the electric industry and provides industry stakeholders with a straightforward approach to examining the future through a simple framework using a mathematical equation.
The “math” is dictated by two emerging trends, which, in combination could present a formidable challenge to the profitability of companies in the electric industry. The two future trends are steeply rising costs coupled with the potential for slow, stagnant, or even declining electricity consumption. Together, they may well alter the equation for the power sector during this decade.
Assessing the impact of these trends can make planning for the future a daunting task for even the most seasoned utility executives. This paper advances a straightforward approach which can serve as a common framework for addressing the state of the industry between now and 2020.
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