Our article on electricity demand and GDP is now out in the Electricity Journal, and is free to download until Jan 3, 2016!
My colleague Richard Hirsh and I just published our article in The Electricity Journal titled “Electricity Consumption and Economic Growth: A New Relationship with Significant Consequences?”. The Electricity Journal. vol. 28, no. 9. November 2015. pp. 72-84. [http://www.sciencedirect.com/science/article/pii/S1040619015002067]
The data tell an interesting story. The decoupling of energy and GDP that happened in the US starting in the 1970s has been followed, a couple of decades later, by decoupling of electricity and GDP. We explore some possible explanations for this new development in the article.
Until January 3, 2016, you can download the article for free (please let me know if you have any issues downloading it). Also email me if you’d like the spreadsheet with all the data and analysis.
Here’s a summary of the article:
The growth rate of electricity consumption has important implications for business and public policy. Increasing use usually boosts electric utilities’ profits, but construction of new power plants to meet that demand may add to managerial and environmental woes. The traditional electric utility business model is predicated on continuing growth in consumption, and if the rate of growth slows (or becomes negative) profits will decline, especially if companies build unneeded generating plants.
This article describes altered trends in the relationship between growth in economic activity and electricity use and offers hypotheses for the changes, focusing on government policy, the changing structure of the American economy, increasing use of information and communication technologies, higher prices for power, and measurement biases.
From the early 1970s to the mid-1990s, electricity demand grew in lockstep with GDP, so that a 1% increase in economic activity implied a 1% surge in electricity use. But after 1996, the electricity intensity (electricity use per inflation-adjusted dollar of GDP) of the US economy began declining. Surprisingly, since 2007, electricity demand growth has been roughly flat, in spite of an 8% increase in real GDP, a situation that may presage a new phase of decoupling. The altered relationship between electricity consumption and economic growth requires all stakeholders in the utility system to rethink old assumptions and prepare for what appears to be the new reality of lower growth rates in electricity consumption.
