Keeping the lights on: serious challenges face policymakers and utilities as they try to keep electricity supply stable and affordable.

• Author: Andersen, Glen

Picture getting home just after dark. You open the door, reach in to turn on the light and nothing happens. Or imagine you can't drink water from the faucet because the water treatment plants don't have enough power to operate effectively. What if you turned on the TV and nothing happened.

These scenarios are common in developing nations. But even though uncommon here, they do happen. Just ask one of the millions of Americans who experienced the 2003 Northeast blackout. A series of failures in the electrical grid on Aug. 14 of that year cut power to more than 50 million people in eight U.S. states and Canada for up to two days. The event contributed to the deaths of 11 people and cost an estimated $6 billion.

The failure also got the attention of policymakers concerned about the nation's electrical system and its ability to supply reliable power.

"The incident should be taken for what it truly was--a huge wake-up call," says Maryland Delegate Sally Jameson, a member of the Public Utilities Subcommittee of the Economic Matters Committee.

That temporary but critical failure highlights a deeper problem in much of the United States--an aging grid and growing demand for power. Retooling the electrical grid into a network that interacts with consumers and integrates solar, wind and other renewable energy sources is no small task. Much of it was built before the age of microprocessors.

"Energy is a priority for legislators across the country, but we're all dealing with different variables and constraints," says Georgia Senator Don Balfour, president of the National Conference of State Legislatures. "We need to raise awareness of some of the challenges and opportunities we will face in the not-so-distant future. Not being able to turn on a light is not an option. Unfortunately, it could be a reality if we don't take a good look at the current state of energy supply and plan accordingly."

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There is also the issue of who will pay the billions it will cost. The country is facing a significant increase in demand for power in the next 25 years, however, and improving the grid is a crucial part of meeting that need.

These are the challenges to building an energy system that will keep the lights on in the 21st century.

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COST ISN'T EVERYTHING

Coal, nuclear energy and natural gas supply almost 90 percent of electricity in the United States. The use of renewable resources now accounts for 10 percent of that power. Non-hydropower sources such as wind and solar contribute about 3 percent of those renewable resources.

The mix is quite different in each state, however. Some rely heavily on natural gas, others on coal, and still others on nuclear energy or hydropower. The way state officials plan for future energy needs will depend on their current mix and available resources.

The appetite for large flat-screen TVs, game consoles, computers and other electronics, along with a growing population are major reasons behind increasing electricity demand. The country will need about 22 percent more electricity three time more than the state of California currently consumes--by 2035, according to the latest estimates by the federal Energy Information Administration. The question facing the states is how to meet the demand.

Traditionally, utilities built power plants that supplied the cheapest electricity to deal with increased demand, and that often meant using coal. Now, states, consumers and investors are placing more importance on how energy development affects the economy, the environment and energy security. State policies, such as renewable electricity standards and incentives for new nuclear plants, reflect this changing emphasis.

It's no longer a...