Total US electricity demand will rise at least 20 percent by 2030, according to the Dept of Energy. Assuming US growth approximates historical averages, that percentage rises to 30 percent, and under a more robust forecast it kicks up to 40 percent.

According to a study commissioned by the Edison Electric Institute, that adds up to USD1.5 trillion in needed new investment for generation and basic transmission and distribution infrastructure. And it actually excludes the cost of what now seems inevitable: carbon dioxide (CO₂) regulation.

US projections are, or course, dwarfed by those of the developing world. Demand for electricity in China, for example, has consistently grown at a double-digit rate every year. And similar rates are expected for India and other large countries, which are seeing unprecedented urban migration.

In the developed world, electricity demand is being driven by the increasing electrification of the economy. The past decade has seen the unprecedented proliferation of laptop computers, flatscreen television sets, cell phones and dozens of other power-intensive devices in homes and businesses. The next 10 to 20 years are likely to see increased use of juice for vehicles. And we’ll see more and more devices to improve global connectivity, increasingly the engine for commerce.

In the developing world, the challenges are even more fundamental–basically creating an entirely new infrastructure where none existed before. China, for example, is seeing urban migration at the rate of a new city a year. And as its most recent forecast shows, the government is firmly committed to creating a 21st century infrastructure.

It all adds up to an unprecedented opportunity for companies that generate and deliver electricity. Those that are able to make needed investments and earn a fair return by navigating the inevitable regulations are on track for robust growth. And unlike virtually any other industry, growth is assured by the taxing power of governments, a critical distinction for an era where consumers are stretched by rising commodity prices and sluggish overall economic growth.

The power systems of the 20th century did their job well. Those of the unfolding new world, however, are going to have to accomplish a lot more.

Take reliability, which is typically measured by nines. A power system that runs 99 percent of the time is terrific for an agrarian economy, such as still exists in much of the world today. It’s less acceptable for an industrial economy, where power outages even 1 percent of the time can create huge supply bottlenecks, as well as dangers to operating machinery. And it’s completely unacceptable for an economy that depends on constant connectivity for success.

Every “nine” of reliability improvement requires an enormous investment, for example taking reliability from 99 percent to 99.9 percent. But data centers and other more power sensitive businesses need a lot better. Even 99.999 may not be enough. And the more electrified the global economy becomes, the more critical it will be to add more nines.

Of course, even 90 percent system reliability seems like a pipe dream in many developing nations, where devastating outages are endemic and even routine. That means even more needed investment, which again governments have no choice but to pony up.

Then there are the environmental impacts of producing electricity. The greatest success story of the 20th century on this front was reducing the emissions that cause acid rain, sulphur oxide (SOX) and nitrogen oxide (NOX). In 1990, the first President Bush and the Democratic Congress passed the Clean Air Act, establishing a cap and trade system to dramatically reduce SOX and NOX.

The system allowed plants–primarily coal-fired–to keep running but required owners to buy emission credits until they made the needed innovations to cut SOX and NOX. Over time, the caps on overall US emissions were reduced, raising the price of credits and increasing the incentive to install the needed equipment.

Today, SOX and NOX emissions are a fraction of their levels in 1990. Equally important, the needed investment has been made without weakening companies or triggering a massive increase in customer rates.

Cap-and-trade for CO₂ has since been adopted by much of the world, initially under the Kyoto Protocol. The glaring exceptions have been the US–which abandoned Kyoto under the current Bush administration–and China, which had maintained following it would sacrifice its ability to meet electricity demand needed to grow its economy.

It’s still too early to say what shape CO₂ regulation will take in the US. But both Republican John McCain and Democrat Barack Obama have supported a cap-and-trade system during their respective tenures in the US Senate. And both are on record supporting such action should they become president.

The devil is in the details. But the upshot is that some kind of cap-and-trade system for reducing CO₂ emissions over time looks fairly certain. Even the most vocal opponents of such action have apparently seen the handwriting on the wall.

For example, Southern Company (NYSE: SO) CEO David Ratcliffe recently stated publicly that the earth can adapt to global warming and warned against taking action that would upset the economy. At the same time, however, the company’s largest unit, Georgia Power, is petitioning regulators to approve a massive investment plan to increase efficiency, renewable energy and investment in nuclear power, which emits no CO₂.

As a result, the debate over the next several months is going to be about what final legislation should look like rather than whether any action should be taken at all. For utilities such as Southern–the largest emitter of CO₂ in the US–success is no longer about stonewalling. Rather, it’s about shaping something that duplicates the success of the 1990 Clean Air Act.

Reducing CO₂ will, of course, cost money. In fact the same Edison Electric Institute study forecasting USD1.5 trillion in US utility capital spending by 2030 predicts and additional USD200 billion will be needed to effectively curtail CO₂. And, as is the case with spending on new power plants and delivery infrastructure, it’s an investment that will have to be made. Equally important, it will be backed by the formidable balance sheets of some of the financially strongest corporations in the world, backed by even more deep-pocketed governments.

Not every power company will profit from the spending. In fact, the history of every capital spending boom in the utility industry shows that costs invariably come in higher than estimates. The volatility of raw material prices and the scarcity of skilled labor are two factors that jacked up building costs in the 1970s building boom. And they’re likely to do so again this time around as well.

For regulated power companies, the ballgame is to work with regulators to recover costs. And so far, we’re on the right track. The nearly USD100 billion in capital spending we’ve seen over the past year, for example, has been largely recovered.

Based on my 20 years-plus analyzing the US utility industry, it would be foolish to expect that to remain the case globally over the next 20. Invariably, if costs rise too far too fast ratepayers will balk and regulators–who are either directly elected or appointed by politicians–will be pressured to listen.

During the ’70s and ’80s, many companies were able to earn a fair return on their investment, even though final building costs in some cases proved above expectations. But others were literally driven to ruin as regulators forced them to write off billions of dollars. That’s the way it happened then, and no doubt it’s how things will wind up this time. Worse, governments in some countries may take to actual expropriation.

The same kind of dichotomy is likely to appear on the unregulated front. With the memory of Enron so close, most power industry executives are loath to take big risks. New building is only done when there is demonstrated need, and when creditworthy buyers can be locked in under long-term contracts. But eventually, some will take a “build it and they will come” approach in pursuit of windfall profits, and they’ll fall on their faces. And governments in some countries will be tempted to expropriate assets as well if the local politics and economies come unglued.

The bottom line is, despite the magnitude and surety of this needed investment, it’s still absolutely critical to be very selective in placing bets. And that’s the discipline I’ll be bringing to my choices.

This month is a particularly interesting time to go shopping in the power sector. Despite having a far more conservative profile than earlier in the decade, stocks sector wide have been getting hit hard by worries that growing economic weakness will hit demand for power. The damage has been worse for companies that have greater exposure to unregulated markets, as well as to companies perceived to be more exposed to tight credit markets.

Electricity demand, however, has been fairly resilient since the bear market began in mid-2007. We could see some fallout going forward, depending on how volatile the crisis in the financial system becomes over the next few weeks. But historically, even in the worst periods for growth, power usage has held up. Simply, it’s an increasingly essential service, and literally the last thing consumers can cut. That should limit near-term downside, even as long-term demand growth trends remain intact.

That makes today’s much lower valuations a strong opportunity for disciplined, incremental investment in selected companies. One that we’re adding to the New World 3.0 Portfolio as a Beyond Our Borders stock: Electricite de France (Paris: EDF, OTC: ECIFF, EDF).

EDF, the company behind France’s nuclear power program, is widely regarded as the most successful in the world. The company’s success in large part has been its ability to consistently apply the advantages of scale to avoid the troubles of US nuclear operators. For one thing, when a particular plant has a problem, company engineers are able to apply the same solution to other similar reactors before that same problem can cause an outage. The result is an extremely efficient fleet that’s kept France far more energy independent that the rest of continental Europe, which has become increasingly dependent on Russian natural gas.

EDF is now taking its expertise abroad, building and buying nuclear plant assets globally. To date, much of the effort has been in the European Union. The company, for example, is currently pursuing the purchase of British Nuclear. Increasingly, however, it’s taking its ambitions elsewhere.

Last month, the company took advantage of runaway credit fears in the US, doubling its stake in Constellation Energy (NYSE: CEG) to 9.5 percent. Constellation has been the target of worries since the release of its second quarter Form 10-Q, in which it revealed a need to post USD3.2 billion in collateral for unregulated power contracts should its credit rating be downgraded to junk.

Many investors took that as a sign of no confidence in the company’s accounting or its presence in unregulated energy sales. And Standard & Poor’s has thrown oil on the fire by stating the company needs to raise capital or face a downgrade. As a result, the stock is down more than 80 percent from its 52-week high, and the company has stated it’s in “advanced stages” of selling itself.

Should EDF elect to be a white knight, it will be getting Constellation’s nuclear plants and other assets–still on track to earn over USD5 a share this year–for less than book value. If it’s not the winning bidder, it will still have a strong asset in the US, where it plans to build at least four advanced nuclear reactors in coming years in partnership with French-government-backed Areva. That’s in addition to a budding global portfolio that includes nuclear projects in China and South Africa.

As for EDF itself, the stock now trades for only about half its own 52-week high and pays a modest yield of over 3 percent. Buy Electricite de France up to USD80, either on its home Paris exchange or on the US over-the-counter market under the symbol ECIFF.