Electricity: Generation Mix Has Shifted, and Growth in Consumption Has Slowed, Affecting System Operations and Prices
Released: 2015-06-29T00:00:00


Highlights: section_title: Why GAO Did This Study
paragraphs: Electricity in the United States has traditionally been generated largely from coal, natural gas, nuclear, and hydropower energy sources. More recently, various federal and state policies, tax incentives, and research and development efforts have supported the use of renewable energy sources such as wind, solar, and geothermal. In addition, consumption of electricity has been affected by federal efforts to improve energy efficiency, changes in the economy, and other factors.

GAO was asked to provide information on changes in the electricity industry. This report examines what is known about (1) how electricity generation and consumption have changed since 2001 and (2) the implications of these changes on efforts to maintain reliability, and on electricity prices.

GAO analyzed data on electricity generation, consumption, and prices and reviewed literature. GAO also interviewed 21 stakeholders, including government officials, and industry representatives, selected to represent different perspectives and experiences regarding changes in the industry.

GAO is not making recommendations in this report. The Department of Energy and Federal Energy Regulatory Commission reviewed a draft of this report and provided technical comments that GAO incorporated as appropriate.

section_title: What GAO Found
paragraphs: The mix of energy sources for electricity generation has changed, and the growth in electricity consumption has slowed. As shown in the figure below, from 2001 through 2013, natural gas, wind, and solar became larger portions of the nation's electricity generation, and the share of coal has declined. These changes have varied by region. For example, the majority of wind and solar electricity generation is concentrated in a few states—in 2013, California and Arizona accounted for over half of electricity generated at solar power plants. Regarding consumption, national retail sales of electricity grew by over 1 percent per year from 2001 through 2007 and remained largely flat from that time through 2014.

The literature GAO reviewed and stakeholders GAO interviewed identified the following implications of these changes:

Maintaining Reliability : System operators, such as utility companies, have taken additional actions to reliably provide electricity to consumers. For example, some regions have experienced challenges in maintaining the delivery of natural gas supplies to power plants. In particular, severe cold weather in the central and eastern U.S. in 2014 led to higher than normal demand for gas for home heating and to generate electricity. Challenges delivering fuel to natural-gas-fueled power plants resulted in outages at some plants. System operators took various steps to limit the effect of this event, including relying on power plants that utilize other fuel sources that were more readily available at the time, such as coal and oil-fueled power plants, and implementing certain emergency procedures.

Prices : Increased gas-fueled generation has influenced electricity prices, with wholesale electricity prices and gas prices generally fluctuating in tandem over the past decade. The effect of the increased use of wind and solar sources on consumer electricity prices depends on specific circumstances. Among other things, it depends on the relative cost of wind and solar compared with other sources, as well as the amount of federal and state financial support for wind and solar development that can offset some of the amount that consumers might otherwise pay. Taken together, the addition of wind and solar sources could have contributed to higher or lower consumer electricity prices at different times and in different regions.

section_title: Letter
paragraphs: The electricity system is important to the health of the U.S. economy and  well-being of Americans. Electricity has traditionally been generated  largely from coal, natural gas, nuclear, and hydropower energy sources.  More recently, various federal and state policies, tax incentives, and  research and development efforts have supported the use of renewable  energy sources such as wind, solar, and geothermal, which offer  environmental benefits over some traditional sources of electricity, such  as fewer emissions of air pollutants. In addition, consumption of electricity  has been affected by energy efficiency improvements, changes in the  economy, and other factors.

You asked us to provide information on changes in the electricity system.  This report examines what is known about (1) how electricity generation  and consumption have changed since 2001, and (2) the implications of  these changes on efforts to maintain reliability, and on electricity prices.

To conduct this work, we analyzed data on electricity generation,  consumption, and prices; reviewed literature, including studies by federal  agencies, electricity system operators, and consultants; and summarized  the results of interviews with a nonprobability sample of 21 stakeholders.  To describe changes in electricity generation, we analyzed data from SNL  Financial (SNL) current as of April 3, 2015. We generally present data on  changes from 2001 through 2013 because 2013 is the most recent year  for which complete data are available, though in some instances we  present more recent data. To describe changes in electricity  consumption, we examined data from the Energy Information   We took  Administration (EIA) on retail sales of electricity to consumers.several steps to assess the reliability of SNL and EIA data. We reviewed  relevant documentation, interviewed SNL and EIA representatives, and  compared some data elements to those available from other sources. We  determined the data were sufficiently reliable for the purposes of this  report. To identify implications of changes in electricity generation and  consumption, we reviewed literature and interviewed stakeholders. We  identified literature by conducting a literature search and obtaining  suggestions from the stakeholders we interviewed. Stakeholders included  power plant owners, system operators, a state regulator, non- governmental organizations, and federal agencies. We selected  stakeholders to represent different perspectives and experiences  regarding changes in the industry, and to maintain balance with respect to  sources of electricity and stakeholders’ roles in the market. Because this  was a nonprobability sample, the views of stakeholders we selected are  not generalizable to all potential stakeholders, but they illustrate a range  of views. Identifying and examining federal agency actions to address the  challenges identified were beyond the scope of this review. Appendix I  provides additional information on our scope and methodology and  appendix II lists the stakeholders we interviewed.

We conducted this performance audit from November 2014 to May 2015  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.
subsections: section_title: Background
paragraphs: This section describes (1) electricity generation and consumption in the  United States, (2) federal and state actions that have influenced electricity  generation and consumption, (3) electricity reliability, and (4) federal and  state regulation.
subsections: section_title: Electricity Generation and Consumption in the United States
paragraphs: The electricity system includes four distinct functions: generation,  transmission, distribution, and system operations (see fig. 1). Electricity  may be generated at power plants by burning fossil fuels; through nuclear  fission; or by harnessing renewable sources such as wind, solar,  geothermal energy, or hydropower. Once electricity is generated, it is  sent through the electricity grid, which consists of high-voltage, high- capacity transmission systems, to areas where it is transformed to a lower  voltage and sent through the local distribution system for use by  industrial, commercial, residential, and other consumers.process, system operations are managed by a system operator, such as  a local utility, that must constantly balance the generation and  consumption of electricity. To do so, system operators monitor electricity  consumption from a centralized location using computerized systems and  send minute-by-minute signals to power plants to adjust their output to  match changes in consumption.

section_title: Federal and State Actions That Have Influenced Electricity Generation and Consumption
paragraphs: Various federal and state actions have influenced electricity generation.  Regarding federal actions, in April 2015, we found that from fiscal year  2004 through 2013, federal programs aided the development of new  electricity-generating capacity through various means, including outlays,  loan programs, and tax expenditures. In more recent years, federal  actions have been targeted toward renewable sources such as wind and  solar, although there has also been federal support for coal, nuclear, and  natural gas-fueled generation. For example, two tax credits—the  Production Tax Credit (PTC) and the Investment Tax Credit (ITC)—and a  related program that provided payments in lieu of these tax credits  supported wind and solar electricity by lowering the costs associated with  electricity generation and providing an incentive to those firms engaged in  the construction and operation of wind and solar projects. The  Department of the Treasury estimated that these two tax credits resulted  in almost $12 billion in revenue losses for the federal government from  fiscal year 2004 through 2013. In addition, the related payment program  provided almost $17 billion in outlays from fiscal year 2004 through  2013. EIA recently estimated that wind, solar, and other renewables,  accounted for about 72 percent of all electricity-related direct federal  financial interventions and subsidies in fiscal year 2013.

Regarding state actions, our April 2015 report found that key state  supports aided the development of electricity generation projects— particularly renewable ones—in most states, from fiscal year 2004   For example, we found that as of September 2014, 38  through 2013.states and the District of Columbia had established renewable portfolio  standards or goals.service providers obtain a minimum portion of the electricity they sell from  renewable sources, creating additional demand for renewables. Retail  service providers meet these requirements in various ways, such as by  building renewable generating capacity or purchasing renewable  generation from other producers through long-term contracts known as  power purchase agreements.

Such policies mandate or set goals that retail  Federal and state activities have also encouraged energy efficiency,  which can reduce the consumption of electricity. For example, Treasury  estimated that energy-efficiency-related federal tax expenditures, such as  for household energy efficiency improvements and the purchase of  energy efficient equipment, amounted to over $15 billion in forgone  revenue for the federal government from fiscal year 2000 through 2013. State governments have also played an important role in encouraging  energy efficiency. According to the American Council for an Energy- Efficient Economy, as of April 2014, 25 states had fully funded policies in  place that establish specific energy savings targets that utilities or  nonutility program administrators must meet through customer energy  efficiency programs. In March 2014, we found that the federal  government has also made efforts to facilitate activities that encourage  customers to reduce demand when the cost to generate electricity is high,  known as demand-response activities. These efforts have included  actions to fund the installation of advanced electricity meters that facilitate  these demand-response activities, as well as regulatory efforts to  encourage demand-response activities.

section_title: Electricity Reliability
paragraphs: Specifically, Treasury estimated that forgone revenue associated with the credit for  energy efficiency improvements to existing homes amounted to $10.36 billion, the credit  for residential energy efficiency property amounted to $3.08 billion, and the exclusion of  utility conservation subsidies amounted to $2.04 billion from fiscal 2000 through 2013. easily and inexpensively stored, electricity generated must be matched  with demand, which varies significantly depending on the time of day and  year. To maintain a reliable supply of electricity, system operators take  steps to ensure that power plants will be available to generate electricity  when needed. In doing so, system operators typically ensure available  capacity exceeds estimated demand so that any unexpected increases in  demand or power plant or transmission outages can be accommodated  without consumers losing access to electricity.

Maintaining a reliable supply of electricity is a complex process requiring  the system operator to coordinate three broad types of services as  follows:

Capacity: Operators procure generating capacity—long-term  commitments to have available specific amounts of electricity- generating capacity to ensure that there will be sufficient electricity to  reliably meet expected future electricity needs. Procuring capacity  may involve operators of power plants committing that existing or new  power plants will be available to generate electricity in the future, if  needed.

Energy: Operators schedule which power plants will generate  electricity throughout the day—referred to as energy scheduling—to  maintain the balance of electricity generation and consumption.

Ancillary services: Operators procure several ancillary services to  maintain a reliable electricity supply. Ancillary services generally  involve resources being available on short notice to increase or  decrease their generation or consumption. These and other services  are needed to ensure supply and demand remain in balance so that  electricity can be delivered within technical standards—for example,  at the right voltage and frequency—to keep the grid stable and to  protect equipment that needs to operate at specific voltage and  frequency levels.

section_title: Federal and State Regulation of Electricity
paragraphs: Responsibility for regulating electricity prices is divided between the  states and the federal government. Most electricity consumers are served  by retail markets that are regulated by the states, generally through state  public utility commissions or equivalent organizations. As the primary  regulator of retail markets, state commissions approve many aspects of  utility operations, such as the siting and construction of new power plants,  as well as the prices consumers pay and how those prices are set. Prior  to being sold to retail consumers, electricity may be bought, sold, and  traded in wholesale electricity markets by a variety of market participants,  including companies that own power plants, as well as utilities and other  retail service providers that sell electricity directly to retail consumers.  Wholesale electricity markets are overseen by the Federal Energy  Regulatory Commission (FERC).

During the last 2 decades, some states and the federal government have  taken steps to restructure electricity markets with the goal of increasing  competition. The electricity industry has historically been characterized by  utilities that were integrated and provided the four functions of electricity  service—generation, transmission, distribution, and system operations— to all retail consumers in a specified area. In much of the Western,  Central, and Southeastern United States, retail electricity delivery  continues to operate under this regulatory approach, and these regions  are referred to as traditionally regulated regions. In parts of the country  where states have taken steps to restructure retail electricity markets,  new entities called retail service providers compete with utilities to provide  electricity to retail consumers by offering electricity plans with differing  prices, terms, and incentives. Beginning in the late 1990s, FERC took a  series of steps to restructure wholesale electricity markets, and wholesale  electricity prices are now largely determined by the interaction of supply  and demand rather than regulation. In addition, FERC encouraged the  voluntary creation of new entities called Regional Transmission  Organizations (RTO) to manage regional networks of electric  transmission lines as system operators—functions that had traditionally  been carried out by local utilities.

In addition to its role in regulating aspects of the electricity market, FERC  is also responsible for approving and enforcing standards to ensure the  reliability of the bulk power system—generally the generation and  transmission systems. FERC designated the North American Electric  Reliability Corporation (NERC) to develop and enforce these reliability  standards, subject to FERC review. These standards outline general  requirements for planning and operating the bulk power system to ensure  reliability. For example, one reliability standard requires that system  planners plan and develop their systems to meet the demand for  electricity even if equipment on the bulk power system, such as a single  generating unit or transformer, is damaged or otherwise unable to  operate.

section_title: The Electricity Generation Mix Has Shifted Toward More Natural Gas, Wind, and Solar Sources, and Growth in Electricity Consumption Has Slowed
paragraphs: According to our analysis of SNL data, the mix of energy sources used to  generate electricity has generally shifted to include more natural gas,  wind, and solar, but less coal and nuclear, from 2001 through 2013,  though the extent of these changes varied by region. Growth in electricity  consumption has generally slowed, with key differences among different  types of consumers and regions.
subsections: section_title: Electricity-Generating Capacity and Actual Generation Have Changed in Several Key Ways
paragraphs: Natural gas, wind, and solar sources provided larger portions of the  nation’s electricity mix from 2001 through 2013 in terms of both  generating capacity and actual generation, while coal and nuclear  sources provided smaller portions, according to our analysis of SNL data  (see fig. 2). At the time of our analysis, 2013 was the most recent year  with complete data for both generating capacity and generation. The  growth or decline in specific energy sources varied over this time period  and across U.S. regions. (See app. III for additional information on  electricity-generating capacity and actual generation by region.) SNL data  on power plants under construction and planned for retirement suggest  that these recent trends are likely to continue.

Generating capacity and actual generation from natural-gas-fueled power  plants increased across the nation from 2001 through 2013, with different  regions seeing varying levels of growth, according to our analysis of SNL  data. Natural-gas-fueled generating capacity increased by about 181,000  MW during this period, and accounted for 72 percent of the new  generating capacity added from all sources.capacity resulted from the construction of about 270,000 MW during this  period offset by a smaller amount of retirements. Regarding actual  generation, electricity generated from natural-gas-fueled power plants  generally increased throughout this period, with a pronounced jump from  2011 through 2012 when generation increased by about 21 percent (see   This increase in gas-fueled  fig. 3). The average utilization of natural-gas-fueled capacity—a  measure of the intensity with which capacity was operated—varied over  this period, declining from about 30 percent in 2001 to a low of about 20  percent in 2003 before generally increasing to about 27 percent in 2013.Increases in gas-fueled capacity and generation led to natural gas  accounting for a larger share of the nation’s electricity mix, increasing  from 17 percent of generation in 2001 to 26 percent in 2013.

All but one region of the country experienced increases in the amount of  electricity generated from natural gas over this period. Specifically,  electricity generated from natural gas declined in Alaska and increased in  the rest of the United States, ranging from an increase of 5 percent in  Texas to almost 200 percent in some regions in the East. In some  regions, natural gas became an increasingly significant energy source in  the generation mix. For example, in New England, natural gas increased  from 31 percent of the region’s electricity generation in 2001 to 42 percent  in 2013. According to EIA, lower natural gas prices, regional  environmental initiatives, and other factors have contributed to increases  in gas-fueled electricity generation.

As the use of natural gas to generate electricity has increased since  2001, the mix of technologies used in gas-fueled power plants has also  changed. Specifically, combined-cycle plants, which use a combustion  turbine in conjunction with a steam turbine to generate electricity, have  become an increasingly common technology for generating electricity— growing from 7 percent of total electricity generation in 2001 to 23 percent  in 2013, according to SNL data (increasing from 42 percent of electricity  generated from gas in 2001 to 86 percent in 2013).expensive to build initially, such plants are more fuel-efficient than simpler  combustion turbine plant designs. This efficiency can make it  economically feasible to generate electricity with natural gas for sustained  periods. As a result, these plants can be economically operated like  traditional baseload generation such as coal and nuclear plants, which  often run continuously for long periods of time. Trends in the utilization of  combined-cycle and other gas-fueled power plants differed over this  period. Utilization decreased for all gas-fueled capacity in the early 2000s,  but while it has increased since 2003 for combined-cycle capacity (from  34 percent in 2003 to almost 44 percent in 2013), utilization has declined  somewhat for other gas-fueled technologies (from 12 percent in 2003 to 8  percent in 2013).
subsections: section_title: Contribution of Wind and Solar Have Increased
paragraphs: Generating capacity and actual generation from wind and, to a lesser  extent, solar power plants increased from 2001 through 2013, with most  of the increase occurring since 2007. (See fig. 4.) We have previously  found that various federal and state actions have contributed to increases  in wind and solar power plant capacity, including financial supports and  state renewable portfolio standards. These increases led to wind and, to  a lesser extent, solar accounting for a larger share of the nation’s energy  mix, increasing from just over 0 percent of electricity generation in 2001 to  4 percent in 2013.

Regarding wind, generating capacity increased about sixteen fold over  this period, with 57,000 MW of capacity added from 2001 through 2013  and wind’s share of total generating capacity increasing from just over 0  percent in 2001 to 5.4 percent in 2013. However, these plants operate  less intensively than some other sources because wind power plants only  generate electricity when the wind is blowing. As such, wind’s share of  the nation’s actual generation increased from just over 0 percent in 2001  to about 4 percent in 2013. Generation from wind increased by over 160  million MWh from 2001 through 2013, the second largest increase in  actual generation of all energy sources after natural gas. Most of this  increase, 136 million MWh (or 84 percent of the total increase), occurred  since 2007. The average utilization of wind power plants fluctuated over  this period between 26 and 33 percent.

Electricity generated from wind is concentrated in a few states; as shown  in table 1, 74 percent of total electricity generated from wind came from  10 states in 2013. In addition, wind can contribute a substantial portion of  generation in some areas. For example, in the Upper Midwest region of  the country, including states such as Minnesota and Iowa, about 14  percent of the region’s electricity came from wind power plants. In  addition, representatives from one utility told us they have had hours  where 60 percent of the electricity produced on their system came from  wind sources, and their system has experienced longer periods with over  50 percent wind generation. By contrast, other regions of the country,  such as the southeastern United States, produced less than 1 percent of  their total electricity from wind in 2013.

Regarding solar, generating capacity increased by about 7,000 MW, or  about eighteen-fold, from 2001 through 2013 at larger power plants with  capacities of at least 1 MW. This trend accelerated in 2014 with the  addition of over 3,000 MW of solar generating capacity, and total solar  generating capacity reached about 10,000 MW. Regarding actual  generation, electricity generated at large solar power plants increased  about 7 fold—by about 5 million MWh—from 2001 through 2013. The  average utilization of solar power plants fluctuated over this period  between 16 percent and 25 percent. Despite the growth in solar capacity  and generation, large solar power plant generation contributed less than  0.2 percent of total electricity generation nationwide in 2013. More so  than wind generation, generation from solar power plants was  concentrated in a small number of states. For example, California and  Arizona accounted for over half of electricity generation from large solar  power plants in 2013.

Association, Solar Market Insight Report 2014 Q4 (Mar. 4,  2015). In addition, since 2010, EIA has collected data on  solar and other generating capacity that is “net metered”— when consumers can use electricity they generate that is in  excess of their consumption at some times to offset  consumption at other times. Though these data have  limitations, they suggest that distributed net-metered solar  capacity has been a large portion of total solar capacity.

Generating capacity and actual generation from coal-fueled power plants  declined from 2001 through 2013 as plants retired and in some cases,  witnessed changes in their usage patterns, according to our analysis of  SNL data. Coal-fueled electricity-generating capacity was stable for most  of this period, but declined over the last couple years as aging plants  retired and little new capacity was added. Specifically, from 2001 through  2013, about 29,500 MW of coal-fueled generating capacity retired, with  about 75 percent of those retirements occurring from 2009 through  2013. In our October 2012 and August 2014 reports, we found that a  number of factors have contributed to companies retiring coal-fueled  power plants, including comparatively low natural-gas prices, the potential  need to invest in new equipment to comply with environmental  regulations, increasing prices for coal, and low expected growth in  demand for electricity. We found that the facilities that power companies  have retired or plan to retire are generally older, smaller, and more  polluting, and some had not been used extensively.

Actual generation from coal declined—in particular since 2008—as  natural gas prices fell and made coal-fueled power plants comparatively  less competitive (see fig 5). Generation from coal declined in most  regions of the country. Several regions, such as New England,  experienced large decreases as they shifted away from coal. As coal- fueled generation has declined, coal-fueled power plants have, in general,  been utilized less intensively. The average utilization of coal-fueled  capacity fluctuated around 70 percent from 2001 through 2008 and then  began a general decline to about 59 percent in 2013. For example,  representatives from the system operator ISO New England told us that  their region no longer regularly uses its coal-fueled power plants to  generate baseload electricity. plants are more often used to generate electricity during peak periods or  when other resources are not available. Retirements of some coal- fueled power plants and the decrease in usage among others led to coal  accounting for a smaller share of the nation’s generating capacity and  generation.

ISO New England serves Connecticut, Maine, Massachusetts, New Hampshire, Rhode  Island, and Vermont.

section_title: Contribution of Nuclear Has Declined
paragraphs: Generating capacity and actual generation from nuclear power plants  both increased from 2001 through 2013, but the share of nuclear in the  national electricity mix declined because other sources increased by a  larger amount, according to our analysis of SNL data. No new nuclear  power plants were built during this period, and four nuclear power plants  retired in the last 2 years, accounting for about 4,200 MW of capacity.  However, nuclear generating capacity increased by 5 percent from 2001  through 2013 because of capacity increases at some existing plants as  owners upgraded equipment or undertook other changes. Regarding  actual generation, electricity generated at nuclear power plants increased  by 3 percent. The average utilization of nuclear power plants fluctuated  around 90 percent throughout this period. Since nuclear plants tend to be  larger capacity plants that run continuously for long periods of time, the  retirement of a single plant can have significant effects on a regional  power system. For example, representatives at ISO New England said  that the Vermont Yankee nuclear power plant, which retired in December  2014, had generated about 5 percent of total electricity generation in their  region in 2014. Since nuclear generating capacity and generation did not  increase as much as gas, wind, and solar, nuclear accounted for a slightly  smaller share of the national electricity mix, decreasing from 21 percent of  generation in 2001 to 20 percent in 2013.

section_title: Contributions of Other Sources Has Varied
paragraphs: The contributions of other energy sources to the nation’s energy mix have  also changed according to our analysis of SNL data, as follows:

Hydropower: Generating capacity and actual generation from  hydropower plants increased from 2001 through 2013, by 3,600 MW  and 68 million MWh respectively. Generation from hydropower  plants varies from year to year based on a region’s weather,  particularly the amount of rain or snow, according to EIA. The western  region generates more electricity from hydropower than any other  region and accounted for 57 percent (about 39 million MWh) of the  increase in generation during this period. The average utilization of  hydropower capacity fluctuated between 28 percent and 38 percent  throughout this period. While hydropower generating capacity  increased in absolute terms through new construction and increases  in capacity at existing hydropower plants, its share of capacity  declined because hydropower generating capacity did not increase as  much as other sources, such as natural gas and wind.

Other sources: Generating capacity and actual generation from other  sources—including oil, biomass, and geothermal together—declined  overall from 2001 through 2013. This decline was primarily driven by  declines in oil-fueled power plants, where generation declined by over  80 percent and average utilization declined over the period. Two  regions, New England and Florida, accounted for a large portion of  the decline in oil-fueled power plant generation. Although oil was a  relatively small portion of overall generation in the beginning of the  period, its share of generation declined further as oil prices rose in the  mid-2000s. Generating capacity and actual generation from biomass,  geothermal, and other sources increased overall from 2001 through  2013. These changes had little effect on the overall national electricity  generation mix, as these other sources represent a small and stable  portion of generation—about 2 percent of the national total in both  2001 and 2013.

section_title: Generating Capacity under Construction and Planned for Retirement Suggest Trends May Continue
paragraphs: Our analysis of SNL data on generating capacity currently under  construction and companies’ plans to retire generating capacity suggests  that these general changes in the electricity generation mix are likely to  continue. Figure 6 shows the amount of generating capacity under  construction, the amount planned for retirement from 2015 through 2025,  and the net change (capacity under construction minus planned for  retirement), and highlights that natural gas, wind, and solar capacity may  continue to increase. There is no coal capacity under construction, and  while about 6,000 MW of nuclear capacity is under construction, more  nuclear capacity (about 15,000 MW) is planned for retirement than is  under construction.construction-planning stages or that has not formally announced  retirement.

section_title: Growth in Electricity Consumption Slowed
paragraphs: Continuing a long-term trend, growth in electricity consumption slowed  from 2001 through 2014. According to EIA data on annual national  electricity retail sales—a proxy for end-use consumption—the rate of  growth of electricity consumption has slowed in each decade since the  1950s, from growing almost 9 percent per year in the 1950s, to over 2  percent per year in the 1980s and 1990s. This decreasing growth trend  continued in the 2000s, with electricity retail sales growing by over 1  percent per year from 2001 through 2007, and fluctuating, but remaining  largely flat from that time through 2014.

These overall trends mask differences in consumption patterns for  different types of consumers, in different regions, and during peak periods  of consumption. Regarding consumers, industrial electricity consumption  has decreased since 2001, while commercial and residential consumption  have increased. Specifically, industrial consumption decreased by 4  percent over the period from 2001 through 2014, and the sector’s share  of total electricity consumption declined from 29 percent to 26 percent.  Meanwhile, residential electricity consumption increased 17 percent, and  commercial consumption increased 25 percent over this period.  Regarding regional differences, consumption patterns have varied across  the country. For example, consumption declined by almost 5 percent in  the Northeast (Mid-Atlantic and New England states) since the recession  of 2007 and through 2014, while it increased by over 9 percent in the  West South Central states of Texas, Louisiana, Oklahoma and Arkansas  over that same period. (See app. IV for additional information on  consumption by consumer type and region.)

In contrast to the slowdown in the growth of overall electricity  consumption, peak consumption has, in some cases, increased. Peak  consumption refers to the level of electricity consumed when the overall  system usage is at its highest, such as during hot days when air  conditioning usage is high.in some instances, differed from changes in total consumption over the  course of a year. For example, in New England, while overall  consumption has declined, peak consumption has risen according to EIA.

Distributed generation and electricity  consumption data  Growth in distributed generation such as  rooftop solar may have also contributed to  changes shown in EIA’s data on retail  electricity sales. Households and commercial  facilities that generate some of their own  electricity displace some electricity sales.  Therefore, actual electricity consumption may  be higher than suggested by retail electricity  sales data.  According to EIA, this effect is  difficult to measure because data on electricity  generated from distributed generation sources  are not readily available.

Changes in the economy: Changes in electricity consumption are  often closely linked to the economy, according to EIA.the economic recession from late 2007 through 2009 was associated  with a large drop in electricity consumption in the industrial sector.  Since many industrial operations operate more evenly throughout the  year, declines in industrial operations could lead to reduced electricity  consumption throughout the year.

Efficiency improvements: Overall improvements in the efficiency of  technologies powered by electricity—such as household appliances  and others—have slowed the growth of electricity consumption,  according to EIA. For example, according to EIA, a new refrigerator  purchased today uses less than a third as much electricity as one  purchased in the late 1970s, despite the larger size of today’s  refrigerators.

Changes in the uses of electricity: Consumer uses of electricity  have changed over the last decades, affecting the nature of electricity  consumption. For example, the growing use of computers and home  entertainment devices has increased the use of electricity. In addition,  air conditioning has become more widely used in U.S. households. As  a result, a heat wave—often associated with peak levels of electricity  consumption—may lead to more electricity consumption during peak  periods than in the past.

Demand-response activities: Another factor that may have affected  consumption trends, particularly peak consumption, is the increasing  use of demand-response activities—steps taken to encourage  consumers to reduce consumption during periods of high demand  when the costs to generate electricity are high. For example, system  operators may call on industrial consumers to reduce their electricity  usage during periods of high demand in exchange for a payment or  other financial incentive. In March 2014, we cited FERC data  suggesting that the extent of demand-response activities had  increased overall—more than doubling from 2005 to reach about 8.5  percent of potential reduction in peak consumption in 2011.

section_title: Changes in Generation and Consumption Require System Operators to Take Additional Actions to Maintain Reliability and Affect Electricity Prices to Varying Extents
paragraphs: According to literature we reviewed and stakeholders we interviewed,  changes in electricity generation and consumption have required system  operators to take additional actions to maintain reliability. Changes in  generation and consumption, together with additional actions system  operators have taken to maintain reliability, have affected consumer  electricity prices to varying extents, though the net effect on prices is  unclear.
subsections: section_title: Changes in Generation and Consumption Require System Operators to Take Additional Actions to Maintain Reliability
paragraphs: According to several stakeholders we interviewed and literature we  reviewed,operators to take additional actions to reliably provide electricity to  consumers, as follows:   changes in generation and consumption have led system  Increased reliance on natural gas: The increased reliance on  natural gas to generate electricity in some regions of the country has  sometimes required system operators to take additional actions to  maintain reliability. Although all fuel-based electricity generation can  face fuel supply challenges, natural-gas-fueled power plants face  different challenges than sources such as coal, oil, and nuclear. For  example, natural gas is not easily stored on site, so the ability of a  natural-gas-fueled power plant to generate electricity generally  depends on the real-time delivery of natural gas through a network of  pipelines. Some regions have recently experienced challenges in  maintaining the delivery of natural gas supplies to power plants. For  example, in January 2014, a severe cold weather event know as a  “polar vortex” affected much of the central and eastern United States,  causing significant outages at plants using various fuel sources and  leading to higher than normal demand for natural gas for both  electricity generation and home heating. According to FERC, there  were no widespread electricity outages. However, challenges  delivering fuel to natural-gas-fueled power plants posed significant  concerns and resulted in outages at some natural-gas-fueled power  plants. System operators took various steps to limit the effect of this  event, including relying on power plants that utilize other fuel sources  that were more readily available at that time, such as coal and oil,  issuing public appeals for conservation, utilizing demand-response  resources, and implementing certain emergency procedures. Going  forward, several stakeholders raised concerns about the sufficiency of  natural gas pipeline capacity in some regions to meet potential greater  future needs. However, FERC has reported that actions taken since  the 2013–2014 winter—including improved communications between  the electricity and natural gas industries and additional cold-weather  preparation—led to better operational performance during the 2014– 2015 winter, which also presented extremely challenging cold-weather  conditions. In addition, a recent Department of Energy (DOE) study  suggests that the future needs for interstate natural gas pipelines may  be modest relative to the historical level of pipeline capacity  additions.

Effects of distributed generation on  system operations to maintain reliability  The addition of distributed generation such as  rooftop solar can present unique challenges  that system operators must manage to  maintain reliability. Several stakeholders told  us that because distributed generation occurs  behind a consumer’s meter, such as at an  individual residence or business, changes in  generation are not visible to or controllable by  the system operator without the installation of  specialized technology.   Regarding the lack of visibility, increases in  distributed generation would be seen by the  system operator as decreases in demand,  since the electricity generated is used on-site  and displaces electricity that would have been  provided through the grid. Because system  operators only see the net effect of these  changes, it is more difficult for them to  understand and predict demand.   Regarding lack of control, if distributed  generation results in more electricity than  customers can use on site, electricity flows  can exceed equipment technical  specifications, which could require equipment  upgrades. Additionally, if there is more  distributed generation than can be used by all  customers, the imbalance of supply and  demand could put the stability of the grid at  risk.    Accommodating increased distributed  generation may therefore require system  operators to, among other things, use models  to predict distributed generation patterns or  install advanced controls to make distributed  generation visible to and controllable by the  utility in order to maintain electric reliability.

GAO-12-635. the polar vortex. According to ISO New England’s system plan,  preserving the reliable operation of the system will become  increasingly challenging as a result of expected retirements, and the  region is in a precarious position for the next several winters as  retirements continue and actions to address retirements—such as  investments in the addition of new transmission and power plants— are years away from completion.

Changes in electricity consumption. Changes in electricity  consumption may require system operators to take additional actions  to maintain reliability both in the long and short-term. Over the long- term, system operators need to ensure they have sufficient generating  and transmission capacity to meet forecasted consumer electricity  needs. This means that a system operator may need to continually  add more transmission or generation capacity when peak demand is  rising, even if average consumption is stable or declining. In the short- term, system operators may need to take actions to increase or  decrease the use of power plants and demand-response resources to  address deviations between forecasted and actual consumption.  According to NERC, the electricity industry faces several challenges  in forecasting electricity consumption, because conservation  programs, distributed generation, and other changes in electricity  consumption have increased the uncertainty of traditional forecasting  methods used in long-term and short-term planning.

The degree to which system operators have had to take additional actions  to maintain reliability in response to changes in generation and  consumption varies regionally based on the extent of these changes and  other characteristics. For example, the extent to which system operators  manage the grid in response to wind and solar growth will depend on  factors such as the relative amount of generation from wind and solar  power plants compared to traditional power plants, the size of a region’s  grid and how interconnected it is with neighboring grids, and other factors.  In this regard, representatives of Midcontinent Independent System  Operator said they have been able to reliably accommodate larger  amounts of wind generation without major operational challenges or the  need for significant additional ancillary services because the large size of  their grid and its extensive connections to neighboring grids provide a  broad base of power plants that system operators can use to balance  variations in the output of wind power plants.literature we reviewed and representatives of the largest utility in Hawaii,  while that state has been able to reliably integrate high levels of wind and  solar, its isolated island grids means it has no neighboring grids to turn to  for balancing variations in the output of wind and solar electricity  generation. Therefore, system operators there have fewer backup  resources to turn to in the event of an unexpected change in wind and  solar output than system operators managing larger, more integrated  grids.

section_title: Changes in Generation and Consumption Influence Electricity Prices, but the Net Effect Is Unclear
paragraphs: Changes in generation and consumption, together with associated  actions system operators have taken to maintain reliability, have  influenced consumer electricity prices in complex, interrelated, and  sometimes contradictory ways, and the net effect of these changes on  consumer prices is unclear, based on our review of literature and  discussions with stakeholders. National average real consumer electricity  prices were nearly 11 percent higher in 2014 than 2001, but prices over  this period fell in 5 years, rose in 6 years, and were relatively stable in 2  years (see fig.7). Prices and trends vary by consumer type and region.  (App. V provides additional information on prices by consumer type and  region.)

Several stakeholders we interviewed and literature we reviewed  highlighted several ways changes in generation and consumption,  together with associated actions system operators have taken to maintain  reliability, have influenced electricity prices. In many cases, these  changes in generation and consumption affect prices at the wholesale  level. The extent to which and how quickly such wholesale price changes  flow through to retail consumer prices depends on a region’s regulatory  structure, individual retail contracts, consumer type, and other factors. A  complete assessment of these factors and their net effect was outside the  scope of this report. Nevertheless, literature and stakeholders highlighted  the following ways changes have influenced prices:

Wholesale electricity prices and natural gas prices have tended  to move in tandem. Increases in gas-fueled generation have  influenced electricity prices, and average annual prices of natural gas  and wholesale electricity—electricity for resale—at key hubs have  generally moved in tandem since 2002, the earliest year for which  data are available. (Fig. 8 shows real annual average natural gas  prices and electricity prices at a key wholesale gas hub and a key  electricity hub.) Specifically, natural gas prices more than doubled  from 2002 to a peak in 2005, declined somewhat, and peaked again  in 2008. According to EIA, these increases in prices were initially due  to increasing demand for natural gas and hurricanes that disrupted  Gulf Coast natural gas production, among other factors. Natural gas  prices dropped in 2009 and have remained low since—the result of  lower demand due to the economic recession and increasing natural  gas production from development of shale gas resources, among  other factors. These changing natural gas prices generally contributed  first to higher and then lower wholesale electricity prices since 2002.  Additionally, as discussed previously, pipeline constraints and  competing demands have affected the delivery of natural gas in some  regions. This situation has influenced natural gas and wholesale  electricity prices during the winter months. For example, during  January 2014, the month a polar vortex occurred, monthly natural gas  and wholesale electricity prices in New England—a region heavily  dependent on natural gas for generating electricity—reached their  highest levels, according to available historical data. Prices  moderated the following winter, with January 2015 wholesale  electricity prices in New England around 60 percent lower than prices  the previous January. More generally, FERC reported that wholesale  electricity prices were more moderate in January and February 2015  compared to January and February 2014, helped by more stable and  less volatile natural gas prices.

Negative wholesale electricity prices  In some instances, wholesale electricity  markets experience negative prices—that is,  power plant owners paying consumers to take  their electricity. For example, owners of  certain power plants are sometimes unwilling  or unable to reduce their generation even if  there is little or no demand for the electricity  they generate. This can be the case for  owners of wind plants, which may receive $23  per MWh of electricity generated from the  federal Production Tax Credit, sometimes  making it economically beneficial for these  wind plants to pay consumers to take their  electricity so they can continue to receive the  credit. It can also be the case for power plants  that are costly to shut down and restart, such  as nuclear plants. Owners of these power  plants may be willing to accept negative  prices for a short time in order to avoid the  cost of shutting the plant down.  Our analysis of available hourly data at  electricity hubs within U.S. regional  transmission organizations indicates that  negative prices occurred on average 0.7  percent of the time from 2005 through 2014.

Specific trends in instances of negative prices  varied by electricity hub, and the annual  percent of negative prices varied across the  hubs, ranging from 0 percent to 9.8 percent  over that time period. In most cases, any  payment consumers might receive as a result  of these negative prices is more than offset by  the cost of purchasing electricity in other  hours. However, negative prices could affect  the profitability of individual power plants in  areas where negative prices occur. expected to contribute to lower prices.regionally and over time based on, among other things, what  alternative power plants exist in a region, the cost of those  alternatives, and the amount of federal and state financial support for  wind and solar development. For example, according to a DOE study   published in 2014, the average cost of procuring electricity from wind  power plants was lower than the cost of purchasing electricity through  the wholesale markets in 2005—a time of high natural gas and  wholesale electricity prices. Conversely, in 2009, after the price of natural gas and wholesale electricity had dropped, the average cost of  procuring electricity from wind power plants was higher than the cost  of purchasing electricity through the wholesale markets. Some of the  costs of wind and solar projects are paid for by taxpayers, which can  offset the prices that some retail consumers may have otherwise had  to pay for electricity generated from wind and solar. According to this  DOE study, prices for procuring wind have been lower as a result of  federal and, in some cases, state tax incentives. Second, as with the  addition of other new power plants, the effect of new wind and solar  sources on consumer prices also depends on the relative costs of any  transmission and ancillary services system operators determine are  needed to reliably integrate wind and solar sources into the grid. To  the extent that additional ancillary services and transmission upgrades  are needed, these costs may be passed on to consumers,  contributing to higher electricity prices. For example, Texas recently  completed a significant transmission project primarily designed to  move electricity generated by wind power plants in remote parts of the  state to population centers, such as Dallas and Austin. The project  has cost close to $7 billion, which will be recovered from Texas  electricity consumers through retail electricity prices. Traditional power  plants also face grid integration costs. Taken all together, the addition  of wind and solar sources could have contributed to higher or lower  consumer electricity prices at different times and in different regions.

Financial viability of baseload power  plants  Lower utilization and lower electricity prices  have affected the financial viability of some  power plants that have traditionally operated  as baseload plants in restructured regions,  according several stakeholders we  interviewed and literature we reviewed. In  some instances, baseload plants have been  utilized less often in recent years as natural  gas-fueled plants have become more cost  competitive and the levels of wind and solar  generation have increased. Additionally, lower  annual wholesale electricity prices starting in  2009 have reduced the revenue power plants  earn when they are operating. According to  several stakeholders and literature, these  factors have sometimes made it difficult for  baseload power plants to recover their costs  and earn a profit. These difficulties can be  exacerbated if additional investment is  needed to continue to operate the power  plant, for example, the installation of pollution  controls to comply with environmental  regulations. Some baseload coal and nuclear  plants have retired in recent years, with these  factors reportedly influencing their decision.  For example, Entergy retired its 604 MW  Vermont Yankee nuclear plant in 2014, which  company financial filings attributed to  sustained low natural gas and wholesale  electricity prices and high power plant costs,  among other factors. According to several  stakeholders and literature, if plant utilization  and wholesale prices remain low, owners  could choose to retire more unprofitable  plants in the future, which could raise  reliability and price concerns.

The effect of retirements on prices may vary. The effect of power  plant retirements on prices may vary, depending on the cost of the  retiring power plant compared to the costs of existing power plants  and power plants built to replace retiring power plants, among other  things. If retiring plants are less expensive than existing and  replacement power plants, their retirement would generally be  expected to raise prices. For example, according to EIA, after the  initial shutdown of San Onofre Nuclear Generation Station in 2012—a  large nuclear power plant in Southern California that produced low- cost electricity—prices in Southern California increased in 2012 and  2013, a change that EIA said is likely attributable in part to the need  for more expensive generation in that region to fill the shortage from  San Onofre’s closure. Alternately, if retiring power plants are  replaced by power plants with similar or lower costs, prices could  remain unchanged or decline in some hours. The relative cost of  retiring and new power plants depends on the specific circumstances  of the retiring and potential replacement plants, and may change over  time with changing fuel prices and other market factors.

Lower electricity consumption could reduce prices. Lower  consumption of electricity—whether in all hours or, particularly, at  peak times—can lower the price of electricity in wholesale markets, a  decline that may translate into lower prices for retail consumers.  Electricity consumption could decline in a given hour, for example,  because of demand-response activities in which consumers reduce  their electricity consumption in response to prices or other incentives.  Electricity consumption could also decline over a longer time period— for example because of reduced consumption due to a slowdown in  economic growth or increased adoption of energy efficient  technologies. These declines in consumption could lower prices in  some or all hours by reducing use of the highest cost plants.  According to PJM Interconnection, demand-response activities served  as an alternative to generating additional electricity during a heat  wave in 2012, which lowered prices.

section_title: Agency Comments
paragraphs: We provided drafts of this product to DOE and FERC for review and  comment. The agencies provided technical comments on early or final  drafts, which we incorporated as appropriate.

As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the appropriate  congressional committees, the Secretary of Energy, the Chairman of  FERC, and other interested parties. In addition, the report will be  available at no charge on the GAO website at http://www.gao.gov.

If you or your staff members have any questions about this report, please  contact me at (202) 512-3841 or ruscof@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix VI.

section_title: Appendix I: Scope and Methodology
paragraphs: This report examines changes in electricity markets. Our objectives were  to describe what is known about (1) how electricity generation and  consumption have changed since 2001, and (2) the implications of these  changes on efforts to maintain reliability, and on electricity prices. To  conduct this work, we analyzed data on electricity generation and  consumption; reviewed literature, including studies by federal agencies,  electricity grid operators, and consultants; and summarized the results of  interviews with a nonprobability sample of 21 stakeholders.

To describe changes in electricity generation, we primarily used data from  SNL Financial (SNL), current as of April 3, 2015. We generally present  data on changes from 2001 through 2013 because 2013 is the most  recent year for which complete data are available, though in some  instances we present more recent data. We obtained SNL data on power  plants with capacities of at least 1 megawatt that are connected to the  grid and intend to sell electricity to retail customers or retail service  providers. We used the SNL-identified primary energy source for the most  recent year for each generating unit at a given power plant and used data  for each generating unit for our calculations, where available.these generating unit level data to calculate total generating capacity and  percentage of total generating capacity for each year from 2001 through  2014 (the most recent year with complete data).

We calculated similar totals and percentages for actual generation for  each year from 2001 through 2013 (the most recent year with complete  data). However, some power plants provide generation data at the more  detailed generating unit level, while others only provide data for the entire  plant.generation calculations, and this unit data accounted for 71 percent of  total generation in 2013. When generating unit data were not available,  we identified the total actual generation for the year at a given plant and  divided it among the units based on share of total generating capacity for  each generating unit. These plant level data accounted for the remaining  29 percent of actual generation in 2013. This approach implicitly assumes  that all units at a given plant are used with the same intensity to generate  electricity, an assumption that may not be appropriate on average. To  examine changes in the intensity with which power plants are operated,  or their utilization, we analyzed annual capacity factor data—the ratio of  actual generation to the maximum potential to generate electricity.

Where available, we used the generating unit data for our actual  To describe changes in electricity consumption and electricity prices, we  examined EIA data on retail sales of electricity to consumers. Retail  electricity prices can be difficult to determine, according to EIA, as they  depend on a customer’s rate structure, which can differ from utility to  utility. EIA does not directly collect data on retail electricity rates.  However, using data collected on revenues and electricity sold, EIA  calculates average retail revenue per kilowatt hour as a proxy for retail  electricity prices.

To determine the frequency that negative prices occurred in markets of  regional transmission organizations, we analyzed price data from hubs at  each of the seven regional transmission organizations.hubs and starting-time periods for the data varied with each regional  transmission organization. We obtained hourly wholesale electricity prices   The number of  from SNL for each regional transmission organization and calculated the  number and percentage of occurrences of negative prices in each.

We took several steps to assess the reliability of SNL and EIA data. We  reviewed relevant documentation, interviewed EIA and SNL  representatives, and compared some data elements to those available  from other sources. We determined the data were sufficiently reliable for  the purposes of this report.

To identify the implications of changes, we reviewed literature and  interviewed stakeholders. We identified literature by conducting a  literature search and obtaining suggestions from the stakeholders we  interviewed. Specifically, we searched sources including Proquest  Environmental Science Professional, PolicyFile, Web of Science, and the  web sites of system operators and federal agencies from December  through March 2015. Stakeholders included power plant owners, grid  operators, a state regulator, non-governmental organizations, and federal  agencies. We identified stakeholders through our research and analysis  of changes in generation and consumption, using our past work, and by  considering the suggestions of other stakeholders. We selected  stakeholders to represent different perspectives and experiences  regarding changes in the industry, and to maintain balance with respect to  sources of electricity and stakeholders’ roles in the market. Because this  was a nonprobability sample, the views of stakeholders we selected are  not generalizable to all potential stakeholders, but they illustrate a range  of views. Throughout the report we use the indefinite quantifier, “several”  when three or more stakeholder and literature sources combined  supported a particular idea or statement. Identifying and examining  federal agency actions to address the challenges identified was beyond  the scope of this review.

We conducted this performance audit from November 2014 to May 2015  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.

section_title: Appendix II: Stakeholders Interviewed

section_title: Appendix III: Additional Information on Electricity-Generating Capacity and Actual Generation
paragraphs: Figure 9 shows the territories of eight regional reliability entities that set  and enforce reliability standards for the electricity industry and four sub- regions for the Western Electricity Coordinating Council. Table 2 provides  generating capacity and annual generation by source in these regions as  well as Alaska and Hawaii for select years.

Regional Transmission Organizations (RTO) manage regional networks  of electric transmission lines as system operators, including operating  organized markets for buying and selling electricity and other needed  services to operate the grid, such as ancillary services. Figure 10 shows  the RTOs in the United States, and table 3 provides generating capacity  and actual generation by source for each RTO and generating capacity  and actual generation by source outside of RTO regions.

Table 4 provides annual generating capacity and generation by regulatory  status and source for select years.

Table 5 provides generating capacity additions and retirements by  source.

section_title: Appendix IV: Additional Information on Electricity Consumption
paragraphs: Table 6 below shows retail electricity sales—a proxy for electricity  consumption—by consumer type, and table 7 shows retail electricity sales  by region.

section_title: Appendix V: Additional Information on Electricity Prices
paragraphs: Table 8 shows average retail revenue per kilowatt hour—a proxy for  electricity prices—by consumer type, and table 9 shows average retail  revenue per kilowatt hour by region.

section_title: Appendix VI: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact

section_title: Staff Acknowledgments
paragraphs: In addition to the individual named above, Jon Ludwigson (Assistant  Director), Eric Charles, Philip Farah, Quindi Franco, Cindy Gilbert, Paige  Gilbreath, Michael Kendix, Armetha Liles, Alison O’Neill, MaryLynn  Sergent, Maria Stattel, and Barbara Timmerman made key contributions  to this report.

section_title: Related GAO Products
paragraphs: Electricity Generation Projects: Additional Data Could Improve  Understanding of the Effectiveness of Tax Expenditures. GAO-15-302.  Washington, D.C.: April 28, 2015.

Energy Policy: Information on Federal and Other Factors Influencing U.S.  Energy Production and Consumption from 2000 through 2013.   GAO-14-836. Washington, D.C.: September 30, 2014.

EPA Regulations and Electricity: Update on Agencies’ Monitoring Efforts  and Coal-Fueled Generating Unit Retirements. GAO-14-672. Washington,  D.C.: August 15, 2014.

Electricity Markets: Demand-Response Activities Have Increased, but  FERC Could Improve Data Collection and Reporting Efforts. GAO-14-73.  Washington, D.C.: March 27, 2014.

Wind Energy: Additional Actions Could Help Ensure Effective Use of  Federal Financial Support. GAO-13-136. Washington, D.C.: March 11,  2013.

Electricity: Significant Changes Are Expected in Coal-Fueled Generation,  but Coal is Likely to Remain a Key Fuel Source. GAO-13-72. Washington,  D.C.: October 29, 2012.

Solar Energy: Federal Initiatives Overlap but Take Measures to Avoid  Duplication. GAO-12-843. Washington, D.C.: August. 30, 2012.

EPA Regulations and Electricity: Better Monitoring by Agencies Could  Strengthen Efforts to Address Potential Challenges. GAO-12-635.  Washington, D.C.: July 17, 2012.

Electricity Grid Modernization: Progress Being Made on Cybersecurity  Guidelines, but Key Challenges Remain to be Addressed. GAO-11-117.  Washington, D.C.: January 12, 2011.

Electricity Restructuring: FERC Could Take Additional Steps to Analyze  Regional Transmission Organizations’ Benefits and Performance.   GAO-08-987. Washington, D.C.: September 22, 2008.


Question-summary annotations: questions: question: How have energy sources changed over time?
answer: As shown in the figure below, from 2001 through 2013, natural gas, wind, and solar became larger portions of the nation's electricity generation, and the share of coal has declined.
child_questions: question: Have these changes been observed "across the board" (universally)?
answer: These changes have varied by region.

question: To what extent are the changes due to the energy production of a few regions?
answer: For example, the majority of wind and solar electricity generation is concentrated in a few states—in 2013, California and Arizona accounted for over half of electricity generated at solar power plants.

question: How has electricity consumption changed?
answer: Regarding consumption, national retail sales of electricity grew by over 1 percent per year from 2001 through 2007 and remained largely flat from that time through 2014.

questions: question: Why has caused system operators to expand electricity service reliability?
answer: For example, some regions have experienced challenges in maintaining the delivery of natural gas supplies to power plants.
child_questions: question: How widespread is this issue?
answer: In particular, severe cold weather in the central and eastern U.S. in 2014 led to higher than normal demand for gas for home heating and to generate electricity.

question: To what extent do these challenges affect energy production?
answer: Challenges delivering fuel to natural-gas-fueled power plants resulted in outages at some plants.

question: How are system operators attempting to mitigate this risk?
answer: System operators took various steps to limit the effect of this event, including relying on power plants that utilize other fuel sources that were more readily available at the time, such as coal and oil-fueled power plants, and implementing certain emergency procedures.

questions: question: How has the increase of gas-fueled electricity generation impacted electricity prices?
answer: Prices : Increased gas-fueled generation has influenced electricity prices, with wholesale electricity prices and gas prices generally fluctuating in tandem over the past decade.
child_questions: question: Has the increase in wind and solar electricity generation likewise affected electricity prices?
answer: The effect of the increased use of wind and solar sources on consumer electricity prices depends on specific circumstances.

question: How do the electricity costs of wind and solar vary, and which factors affect this most?
answer: Among other things, it depends on the relative cost of wind and solar compared with other sources, as well as the amount of federal and state financial support for wind and solar development that can offset some of the amount that consumers might otherwise pay.

question: What overall impact on electricity prices has the increase of wind and solar sources had?
answer: Taken together, the addition of wind and solar sources could have contributed to higher or lower consumer electricity prices at different times and in different regions.

questions: question: How has the United States traditionally generated electricity?
answer: Electricity in the United States has traditionally been generated largely from coal, natural gas, nuclear, and hydropower energy sources.

question: How have policies shifted to support alternative energy sources?
answer: More recently, various federal and state policies, tax incentives, and research and development efforts have supported the use of renewable energy sources such as wind, solar, and geothermal.
child_questions: question: How have these policies affected electricity consumption?
answer: In addition, consumption of electricity has been affected by federal efforts to improve energy efficiency, changes in the economy, and other factors.