Monday, December 5, 2011

Big Deal: Electricity Growth Rate Hits Record Low

Ever since the birth of electricity service, the demand for electricity has increased almost automatically every year.  But the growth rate--how quickly electricity demand rises--is a powerful force shaping the entire energy business, economy and environment.

The North American Electricity Reliability Council, the top cop for the grid, states that the growth rate for electricity demand has fallen to a record low in its most recent reliability assessment. See the NERC 2011 Long-Term Reliability Assessment at or Charged with keeping the lights on in North America, NERC performs every year a 10-year reliability assessment and has been doing since 1967.

NERC's demand growth rate has declined every year since 2002 when it was 1.79%.  In the 2011 report, the electricity growth rate falls to 1.27%, the record low since the first reliability assessment in 1967 (page 11 of the Report). This is a big deal, and the declining growth rate is rooted in both slower economic growth over the last decade and booming demand response and energy efficiency industries.

Indeed the drop in the growth rate from 1.79% to 1.27% or about 0.5% will reduce the need for new generation by about 40,000 megawatts--roughly the equivalent of all the generation in Pennsylvania--when sustained over a 10 year period.

The 2011 low growth rate will cut fossil fuel consumption, reduce pollution, lower consumer costs, and decrease needed new generation.  Declining growth rates combined with increasing demand response contribute to the approximately 30,000 megawatts drop in the peak demand forecasts. Indeed NERC is now projecting a considerably lower peak demand in 2020 than it was recently forecasting for 2016.

Another major factor lowering NERC's forecasted peak demand is the big jump in demand response.  Demand response grew from 30,000 megawatts to 43,000 megawatts just between 2010 and 2011.  This increase alone postponed the need for new generation by one year.

While the electricity pie continues to expand, it is expanding significantly more slowly so that NERC now projects US internal peak demand rising about 95 gigawatts in the next ten years, as opposed to the approximately 125 gigawatts it was projecting as recently as 2008.

Declining electricity growth rates are a big deal and are another indicator of the boom in energy efficiency and demand response that gets far too little attention.

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