Exelon’s CEO warns the U.S. could face widespread blackouts by 2027, arguing utilities need permission to build new power plants as investment has failed to keep pace with future demand.
Competitive electricity markets discourage investment by offering insufficient returns, leaving utilities underinvesting despite rising power needs and grid reliability concerns.
Fixing the grid will require higher electricity prices, market reforms, or a return to regulated utility-owned generation, with backup batteries and generators becoming increasingly important for reliability.
The CEO of America’s largest utility, EXELON, foresees blackouts in the US in 2027. To boost power supply Calvin Butler wants states to allow his utility to build new power plants. Opponents will object, saying this would saddle utility consumers with the risks. Whereas now, the builders take the risks.
Meanwhile, we are scratching our heads because economists have long theorized that utilities build excess rate base in order to raise earnings. We would amend this to argue that utility managers only deploy excess capital when they can earn more than their cost of capital (would you invest to earn 8% if you had to pay 10% for the borrowed money?), and we are absolutely convinced that utilities have been earning more than cost of capital for decades. In other words, they should be over- investing like crazy in facilities that would prevent things like electricity blackouts.
But they aren’t.
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