Is America's Appetite for Energy Consumption Finally Leveling Off?

The Choose Energy Team
By The Choose Energy Team July 3rd, 2013
For business

Electricity in the U.S.

Electricity demand in the U.S. is expected to hold steady for the foreseeable future; this according to a recent International Energy Agency (IEA) report. For the first time in more than 60 years of monitoring energy consumption, the growth in power usage will be nearly flat over the next few years. In addition, demand is expected to increase by a scant .5 percent annually for the next two decades.

Reasons for this leveling off of demand – and some experts even project a decrease – are due to several factors. For one, energy efficiency efforts both here in the U.S. and in developed countries around the world are beginning to bear fruit. Use of energy efficient lighting and home appliances mean that the average household is consuming less electricity than it used to, even as the use of electronic devices has increased.

In addition, there is an awareness on the part of at least some Americans that reducing our energy consumption is the right thing to do for the planet. Many households are switching to renewable energy sources in the form of solar PV panels for generating their own electricity. While currently still a drop in the bucket, power from renewable sources makes up a growing percentage of energy use. When you add in the slow economic and job growth we’ve experienced in recent years, the demand decay for electricity begins to make sense.

What does this all mean for electricity producers?

What it means is that they are being forced to be more efficient themselves. With utility deregulation taking hold in more and more states, the utility companies are recognizing the need to be more cost-conscious and more competitive. And that’s good news for all of us. If a utility wants to stay profitable, they need to lower their expenses through things like more efficient production and transmission of electricity. In addition, they will need to examine their old paradigm of simply selling more electrons to their customers, and begin to build a more effective business model.
When Congress first enacted regulations on the electricity-generation industry in 1935, the utilities were essentially given a monopoly over their small area of power distribution. The hundreds of power companies and cooperatives that were created were allowed to set their own rates, without the threat of competition. But as we know, competition is the biggest driver of innovation and efficiency.

So where are we now?

Since energy deregulation was introduced in the 1990s, the electric utility companies have fought it at every turn. But that is no longer an option for them. Deregulation is here, and it’s happening at a time when the power companies can’t simply grow their way to profitability by raising rates. We believe that the more people who exercise their right to choose a lower energy bill, the more the utilities will be forced to improve or perish.

The changes that are taking place in the industry will ultimately result in a more efficient system that produces cleaner power at a cheaper rate than ever before. The utilities that are able to compete will, and those that aren’t will be absorbed into the efficiency model. In the end, we all win – by having access to the most efficiently produced power at the best price we can find.

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