Why U.S. Electricity Demand Will Increase

Since The Great Recession that started in 2007, one of the biggest energy stories has been the flattening of U.S. electricity demand. For more than a decade now, our power consumption has been stuck right at around 4 trillion kilowatt hours per year . In contrast, in the decade prior to the recession, use increased 18%, and in the decade prior to that, demand jumped over 25%. This has taken us by surprise, If you go back to 2006, right before the recession hit, the U.S. Energy Information Administration projected that we would now be using close to 20% more electricity than we actually are.

There's no question that the once very strong link between U.S. economic growth and new energy demand (i.e., energy intensity) has weakened considerably, which can be chalked up as a natural maturation. One unit of GDP doesn't need to be supported by an equal one unit of energy input. Yet, for electricity, our most indispensable and convenient form of energy, a significant uptick in demand is virtually assured: a declining growth rate is not the same as a decline.

Even though rising efficiency has helped flatten our power demand amid strong economic growth, other factors that are subject to change could easily push up demand. The fact is that we are still feeling the effects of the recession, even a decade later. Wages and purhcasing power have been stagnant for a while now, and economists remain stumped as to exactly why. To illustrate, the St. Louis Fed reports that we saw a near 80% collapse in Housing Starts just a few years after the recession started, and even with a solid rebound since, new units started are still less just 1.2 million a month - the lowest since the early-1990s. This is bound to change. Consider some other factors that could easily increase electricity demand:

  • The bi-partisan focus on a "manufacturing renaissance," and a return of energy-intensive output
  • A bi-partisan $1.5 trillion new infrastructure plan
  • "Deep electrification," where the goal even promoted by environmentalists themselves is to basically "electrify everything," such as electric cars, buses, and high-speed rail
  • More need for air conditioners in a "global warming world:" air conditioning can deovur 3,000 to 4,000 kWh of electricity per year
  • Efficiency measures to cut demand get increasingly more difficult as the "low-hanging fruit" gets picked
  • On average, we are adding over 3 million people and $300-400 billion in GDP each year

In fact, focusing on "deep electrification," a still burgeoning transformation for the way in which we utilize power, environmentalists like me want to utilize more electricity, across all sectors of the economy. For example, as we seek to become more electrified, the U.S. National Renewable Energy Laboratory (NREL) reports that a "rapidly growing demand for electricity" is expected. Just think about it: electric cars can surge a home electricity use by over 50%; California's high-speed rail bullet train goal centers on a massive $77 billion project connecting San Fran and LA. NREL's forecasts a 36% jump in U.S. power demand even under a conservative "reference" scenario:

  • "Under our reference case, total U.S. electricity consumption grows from approximately 3,860 TWh in 2016 to 5,260 TWh in 2050. Consistent with results from other analyses of electrification impacts on electricity demand," NREL

Indeed, too many in the anti-fossil fuel business keep telling you that new U.S. electricity demand will be insignificant, perhaps to make you think that less established and intermittent sources of power alone can satisfy our needs. But, it's simply not true. Especially as we seek "deep electrification" across the economy, our clear need for more electricity will surely help ALL sources of power  - with coal and natural gas currently supplying about 65% of it.

Source: Forbes
Date: Aug 27, 2018