Low growth in electric demand is becoming a fact of life for the power sector, and zero growth is not out of the question, according to participants in a panel discussion July 14 at the Energy Information Administration (EIA) 2014 conference in Washington, D.C.
“What the heck is going on with electric demand growth” said William Booth, a senior electricity advisor with EIA. Booth moderated the session and said low-demand increasingly looks like a fact of life rather than an aberration.
The session included Jim Diefenderfer with EIA’s coal, nuclear and renewable analysis office; consultant Pamela Morgan of Graceful Systems; and Paul Sotkiewicz, chief economist with the PJM Interconnection.
Although electricity demand fell in only three years between 1950 and 2007, it declined in four of the five years between 2008 and 2012, EIA has reported.
Demand growth has been minimal since the dramatic recession of 2007-2008, demand growth has been historically weak, the panelists said. EIA also forecasts that demand growth to be just under 1% (0.9%) between 2013 and 2014, noted EIA’s Diefenderfer.
In addition to its reference case, EIA has also recently came up with a virtually no demand growth model for the period, Diefenderfer said. Under the EIA low-demand scenario, annual electricity demand in 2040 is only slightly higher than the 2012 level of 3.8 trillion kilowatthours (kWh).
There are a number of potential explanations for the drop, said PJM’s Sotkiewicz said. The sluggish economy has people being more prudent with their energy expenditures. The number of electric utility clients has also been reduced in some areas with adult children moving back, he said.
“People are moving in together,” Sotkiewicz said. “Families are consolidating.”
It remains unclear how much of the weak demand picture is due to energy efficiency measures and how much is due to increased frugality by rate payers, officials said.
During the questions and answer period, Morgan of Graceful Systems, said that thus far the implementation of electric vehicles has been less than expected.
While much has been made about low natural gas prices and the array of tougher Environmental Protection Agency (EPA) rules, far fewer coal plants would be retiring if demand growth were healthier, Sotkiewicz said.
About 14% of electric generation capacity has been retired since 2009 and the trend continues, Sotkiewicz said. This has happened at a time when electricity prices have been modest, Sotkiewicz said
It’s also occurred before states must come up with plans to reduce power plant carbon emissions 30% by 2030.
The PJM official also said two high-profile transmission projects in PJM (the Mid-Atlantic Power Pathway and the Potomac Appalachian Transmission Highline or PATH) were both cancelled in recent years.
With power sector income from energy sales declining, there is more attention focused on capacity markets – which is often a much debated process, the panelists said.
“Unbundling” could potentially blunt the impact of decreasing electric sales on utilities but everything depends on the details of such programs, Morgan said.