One of the electricity marketplace's oldest rules is being modified and even possibly repealed. For decades, substantial annual increases in electricity demand were a given. But now the rate of electricity demand growth is falling, as demonstrated by NERC (top grid cop) projecting over the next 10 years the lowest ever rate of electricity growth. Even more shockingly, EIA forecasts a 0.5% drop next year in total electricity demand.
But why is electricity demand softening? Is it simply slowing GDP growth? Some insist so. Or are structural changes taking place in electricity markets?
Those focusing on GDP growth as the primary cause of electricity demand changes are overlooking a boom in energy efficiency that is taking many forms. Yesterday, I posted on Pennsylvania's successful Act 129 electricity conservation program and many other states have similar programs. Consider that NERC reported that demand response increased from 30,000 to 43,000 megawatts just in 2010.
Another example of structural change is provided by the US Department of Energy's announcement that 600,000 low-income homes, including 125,000 multi-family properties, have been weatherized since 2009. The massive weatherization was part of the American Recovery and Reinvestment Act or "Stimulus." See http://energy.gov/articles/energy-department-announces-major-recovery-act-milestone-600000-homes-weatherized-three.
That is a lot of homes or electric accounts. It is more than all the residential accounts in the Duquesne Light service territory that serves Pittsburgh and its suburbs and is a little less than 50% of all PECO's residential accounts in Philadelphia and its suburbs. Each home will cut energy consumption by 35% and total savings will be $320 million in the first year. Savings will continue typically for at least 10 years.
Rising demand response, big stimulus energy efficiency programs, rising energy efficiency standards for buildings, lighting and appliances, successful state electricity efficiency programs, the growing energy service or "ESCO" business add up to a boom in energy efficiency and structural change on the demand side of the electricity marketplace.
The boom in energy efficiency is employing hundreds of thousands of Americans, is making America more competitive, and adding to GDP growth. Yet this piece of GDP growth is cutting electricity and energy demand. It should also change the calculations of everyone in the electricity business.