PJM economist says link between GDP, load growth has become blurred

Calculating load growth in the PJM Interconnection isn’t as simple as it once was, PJM Chief Economist Paul Sotkiewicz told the PennWell GenForum conference Dec. 8 in Orlando, Fla.

Roughly 21% of the U.S. Gross Domestic Product (GDP) is produced in the PJM region, Sotkiewicz told the gathering organized by the GenerationHub news service.

Traditionally a measurable uptick in the economy, in terms of GDP, would usually translate into greater demand for electric power. But the relationship between load growth and GDP growth has been eroding since World War II, he said.

“The 1990s show almost no relationship between GDP growth and load growth,” Sotkiewicz said in his keynote presentation materials.

The 13-year period between 2000 and 2012 shows that it takes more than 1% GDP growth just to keep the load growth flat, said the PJM official.

There could be a number of factors influencing this, said the PJM economist. The “saturation” of electricity in daily American life has increased over the decades to the point it limits the potential for new growth. When economic downturns force adult children to move in with their parents (limiting new household growth) it limits potential electric growth.

Emerging trends like energy efficiency programs and distributed resource programs can also dampen load growth – and make it harder to predict, Sotkiewicz said.

The lower load growth was a contributor to the cancellation of some anticipated backbone transmission projects that not long ago were considered key to improving reliability in the PJM future, the economist said.

This also happens at a time when PJM has seen 26,000 MW of power generation retirements since 2009, the PJM official added.

 

About Wayne Barber 4201 Articles
Wayne Barber, Chief Analyst for the GenerationHub, has been covering power generation, energy and natural resources issues at national publications for more than 20 years. Prior to joining PennWell he was editor of Generation Markets Week at SNL Financial for nine years. He has also worked as a business journalist at both McGraw-Hill and Financial Times Energy. Wayne also worked as a newspaper reporter for several years. During his career has visited nuclear reactors and coal mines as well as coal and natural gas power plants. Wayne can be reached at wayneb@pennwell.com.