ABSTRACT: Public policies at both the state and federal levels in the United States and a variety of technological and economic changes are poised to significantly alter both the demand for and supply of electricity in the country over the next several decades. These changes will yield a wide range of new challenges and opportunities, including variable energy sources like wind and solar radiation; adjusting distribution systems to accommodate small-scale, distributed generators; accommodating the charging of electric vehicles and other changes in electricity demand; making the best use of new technologies to ensure reliability and efficiency under changing conditions; responding to threats presented by the vast increase in data communications within the grid; and meeting changing workforce needs.

A variety of technologies exist today that can help meet the emerging challenges effectively in the United States. In a recently completed two-year study on the future of the U.S. electric grid that we performed with a dozen other economists and engineers, however, we found that the promise of these new technologies will only be fully realized if a number of regulatory policies are changed, if necessary research and development is performed, and if important data are compiled and shared. Maintaining system reliability, keeping electricity rates at acceptable levels, and achieving state and federal policy goals will depend to a large degree on a few key choices made--of not made--at the state and federal levels and within the industry over the next few years.

In this article, we first discuss the performance of the U.S. grid today. Then, we describe several of the most important challenges and opportunities that are likely to face the U.S. grid over the next several decades.