Final Received 13 Dec 2013 Word count 7,900 Chapter 23 Perfect storm or perfect opportunity? Future scenarios for the electricity sector Jenny Riesz, Magnus Hindsberger, Joel Gilmore, Chris Riedy Abstract This chapter applies futures thinking to explore possible scenarios that electric utilities may face in the coming decades. The chapter applies a top-down approach to identify the key drivers that could influence business models. It describes three possible futures in detail. Firstly, the “Centralized” future moves towards decarbonization, but retains the centralized model present in most power systems today. In contrast, the “Decentralized” future moves towards greater decentralization, whilst retaining a significant role for the grid. The “Disconnected” future moves to complete decentralization, with most customers disconnecting from the grid entirely. The chapter concludes that all three scenarios are possible and will have important implications for electric utilities. Wise businesses will adopt a risk management approach. Key words: Future scenarios Futures thinking Decentralized Disconnected Electricity supply industry 1 Introduction Thinking about the future rigorously and creatively is hard. When we do think about the future, it is common to imagine futures that are fundamentally similar to the present. Alternatively, it can be easy to underestimate the inertia of the present, and imagine rapid revolution when sedate evolution is more likely. It appears clear, however, that change is coming in the electric supply industry. Change itself is not new, but the rate of change has increased, as has the number of concurrent changes, as discussed throughout this book. Around the developed world, growth in utility-delivered electricity has declined, and even appears to have reversed in some places (Sioshansi, 2013). This has been caused by a combination of slowing economic growth, customers responding to price increases, investments in energy efficiency and—the key topic of this book— increased levels of distributed energy resources (DER). In addition to this, we observe a growing focus on reducing greenhouse emissions, affecting supply side investments. Furthermore, developments in information technology, “smart grids”,