Vulnerability of the National Electric Grid to the Influences of Renewable Power Generation and Consumption
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Publisher:The Ohio State University
Series/Report no.:The Ohio State University. Department of Finance Undergraduate Research Theses; 2016
Trends over the past 25 years suggest a decline in fossil fuel consumption per capita and an increase in per capita consumption of renewable energies. Consumption per capita of energy generated from fossil fuels, as a percentage of the total per capita consumption, declined from 92.3% to 89.3%, while per capita consumption of renewables increased from 7.7% to 12.0%. Should these trends persist, the utilities sector could be in danger of decreased profits, which could lead to cost cutting measures and ultimately a lessening of maintenance for the national electric grid in the distant future. A multiple linear regression model was created to forecast the future affect that a switch in energy consumption would have on the utilities sector in the United States and the price sensitivity in different sectors. The model utilizes annual renewable energy consumption per capita and sector-based electricity pricing to predict the annual consumption of fossil fuels per capita. Forecasts for fossil fuel consumption per capita could show how the current landscape of the utilities sector, which generates power largely from fossil fuels, will be troubled, should sector strategies not adapt. Based off of the predictive model, should current trends persist, the utilities sector will see decreasing profits. To counteract lower profits, electricity prices may increase to some customers, potentially causing consumers to search for alternate sources of electricity. Though not an immediate threat due to its small share of the energy market, renewable energy trends suggest that consumer’s source of energy will shift in the future, from fossil fuels to renewables. Additionally, changes in regulation throughout the industry could alter the energy landscape further. Without a change to the current structure of the utilities sector, and if facilitated by regulatory alterations, customers could increasingly leave the national electric grid in favor of lower cost alternatives.
Academic Major: Finance