Electricity - Future Trends In The U.s. Electric Industry

In Annual Energy Outlook 2004 the EIA predicted that from 2002 to 2025, residential U.S. electricity consumption will grow at a rate of 1.4% annually. This compares with 7% growth per year during the 1960s. Several factors led to this decreased growth of electricity consumption, including increased market saturation of electric appliances and improvements in efficiency. Commercial demand is expected to grow by 2.2% per year because of growth in commercial floor space, while industrial demand will likely increase by 1.6% per year as industrial output rises.

Historically, the demand for electricity in the United States has been related to economic growth. This relationship will continue, but electricity use is expected to grow more slowly than the gross domestic product (GDP), a measure of economic growth. Figure 8.10 shows how electricity sales are related more to economic growth (the GDP) than to population growth. Also, the phrase "five-year moving average" means that each point on the graph is an average of that year and the previous four years'data. This type of averaging is often done to get a better idea of what the real long-term averages would be, without heavy influences on data from cyclical influences, like business or weather cycles.

The issue of electric growth is important and carries financial risks for electric companies. If the industry underestimates future needs for electricity, it could mean power shortages or losses. However, excessive projections of the nation's needs could mean billions of dollars spent on unneeded equipment.

The EIA estimated that the United States will need 356 gigawatts of new generating capacity from 2002 to

FIGURE 8.6

2025 to meet growing demand for electricity and to replace retiring units, most of it after 2010. From 2002 to 2025, sixty-two gigawatts of capacity will most likely be retired, accounting for nearly all old fossil-fired plants that are not competitive with newer types of fossil-fired plants.

The EIA's Annual Energy Outlook 2004 projected that electricity prices will decrease by 8% from 2002 to 2008 and will then remain somewhat stable until 2011. From 2011, however, electricity prices are expected to increase gradually by 0.3% per year to 2025.

Continued concerns about acid rain and global warming could result in tightened environmental emission standards, which may have an impact on electrical utility expansion decisions, prices, and supply. Continued advances in solar and wind turbine technology could make renewable sources of electrical power more economical in the future. Some energy experts and environmentalists claim that increased efficiency and conservation efforts are the most sensible alternatives to new construction or to the burning of more fossil fuels in existing plants.

FIGURE 8.7

FIGURE 8.8

FIGURE 8.9

FIGURE 8.10