New Study Calculates Benefits of Electricity Diversity

July 25, 2014

Maintaining Diverse Electricity Generation is a Pillar of the Architecture of Abundance

A new report from IHS underscores the important role America’s fuel diversity plays in ensuring access to affordable and reliable electricity, and warned actions to limit generation sources could increase price volatility, drive up electricity rates, and threaten jobs and industrial competitiveness. 

The report, entitled “The Value of US Power Supply Diversity,” compared a base case, reflecting the United States’ diverse power system during the 2010-2012 period, with a “reduced diversity case,” which included reductions in baseload power sources like coal and nuclear. The authors found, “The current diversified portfolio of US power supply lowers the cost of generating electricity by more than $93 billion per year, and halves the potential variability of monthly power bills compared to a less diverse supply. Employing the diverse mix of fuels and technologies available today produces lower and less volatile power prices compared to a less diverse case with no meaningful contributions from coal and nuclear power and a smaller contribution from hydroelectric power.”

The authors also analyzed how limiting power options would impact jobs and the economy, and calculated the high costs consumers would be forced to pay as a result of diminished diversity. According to the report, “Power supply in the reduced diversity case increases average wholesale power prices by about 75% and retail power prices by 25%. … If the US power sector moved from its current diverse generation mix to the less diverse generating mix, power price impacts would reduce US GDP by nearly $200 billion, lead to roughly one million fewer jobs, and reduce the typical household’s annual disposable income by around $2,100. These negative economic impacts are similar to an economic downturn.”

Electricity diversity is one of the pillars of the committee’s Architecture of Abundance energy strategy. House Energy and Commerce Committee Chairman Fred Upton (R-MI) unveiled this new energy vision earlier this month at the EIA 2014 energy conference, and stressed the importance of a true all-of-the-above energy portfolio. Upton expressed, “We all need and reliable power, and everyone – families, schools, businesses, hospitals, manufacturers – everyone benefits when it costs less to keep the lights on. That’s why we’re so concerned about the administration’s aggressive approach to limit and undermine critical baseload sources of generation like coal and nuclear.”

To learn more about the Architecture of Abundance, including Pillar II: Maintaining Diverse Electricity Generation, visit: http://energycommerce.house.gov/yes2energy