With Demand Flat, Electrification Might be the Only Hope for Utilities
US utilities are in a pickle.
After 100 years of constant electricity demand increases, the US demand for electricity has flatlined. Our economy and population are continuing to grow, but electricity demand isn’t.
This is a problem for utilities who are built on a perpetual growth model. And, why wouldn’t they? For over 100 years they have seen electricity demand continue to rise. They take their profits, invest back into upgrades and infrastructure, generate more electricity, and the cycle continues.
However, now utilities find themselves in a very unfamiliar place. Either change their business model and start looking into other revenue channels or hope that demand picks up again.
The problem is the US Energy Information Administration’s (EIA) 2017 Annual Energy Outlook expects growth of just 0.6 percent annually between 2015 and 2040, relative to 1.3 percent growth the previous 25 years. Even that might be overstated as EIA is known for relatively conservative projections.
So, with the demand continuing to flatline for convention electricity consumption, how do utilities survive? The answer to that question is quite complicated, but one way is to look into unconventional sources to increase electricity demand.
Picture this, what if every car and truck purchased in the US ran on electricity? And, what if we could convert every natural gas heater over to an electrical heater? It’s a lofty goal but one company did some research on the potential impact.
The Brattle Group released a new report saying that if US heating and transportation were fully electrified, it would add “3,000 TWh to U.S. electricity demand by 2050, nearly doubling 2015 electric load.” This would increase electricity demand to over 2% in the next 25 years rather than a measly 0.6%.
As a bonus, such a strategy, in conjunction with connecting the grid to more renewable energy, would also produce “economy-wide emissions reductions of over 70% relative to 2015,” helping US states and cities reach their ambitious goals.
Here’s the thing, though. Large-scale electrification won’t just happen on its own. In fact, just slightly over 1% of all cars sold in 2017 were EV and the natural gas market is booming in parts of the US making it harder to move away from fossil fuels.
Pushing for electrification of the transportation and heating industry will require a lot. It will require policy support from lawmakers. It will require state regulators willing to re-envision the utility business model. It will require organizing and advocacy to overcome fossil fuel resistance.
It will also require the American people to make a conscious decision as to the products they are buying. An America wherein a substantial portion of transportation, heating, and cooling has been electrified is one with lower carbon emissions and a greater demand for electricity.
In short, utilities should be pushing the electrification of everything as it seems to be their only hope to increase demand for their product and generate a profit (outside of mergers and asking for government subsidies). The change won’t happen overnight, but even a slight increase in electricity demand can keep utilities in business and help reduce emissions in the US.
Aaron is a content writer and organic marketer with extensive experience in the energy industry. He frequently writes for Power Target on Electricityrates.com and CompareElectricity.com.
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