An article authored by Brattle economists examining the factors behind the sustained slowdown in electricity demand growth has been featured as the cover story in the December 2012 issue of Public Utilities Fortnightly.
Since the onset of the recession in December 2007, demand for electricity has plummeted, and the slowdown in growth has persisted after the recession’s end 18 months later. The authors illustrate the distribution of electricity sales growth to show that demand growth has been declining since 1950, from an average annual electricity sales growth rate of 9.86 percent during the 1950s to an average annual growth rate of 0.85 percent in the first decade of the 21st century. According to the U.S. Energy Information Administration, total delivered electricity use in all sectors is estimated to increase at an annual growth rate of 0.7 percent per year from 2010 through 2035, but consumption per U.S. household is expected to decline in this same timeframe. According to the authors, five primary forces are creating a “new normal” for the decline in electricity demand growth. The forces that all play major roles include: a weak economy; demand-side management; energy efficiency codes and standards; distributed generation; and fuel switching, particularly toward natural gas. Other secondary forces, such as energy efficiency policies that further boost energy efficiency of products (i.e., energy efficiency portfolio standards) are also responsible for dampening demand growth as well.
The article, “Demand Growth and the New Normal,” is authored by Brattle principal Ahmad Faruqui and research analyst Eric Shultz. It is available to download below.