EIA Analyzes How Economy Affects Electricty Demand

 

Source: U.S. Energy Information Administration, Annual Energy Outlook 2013 Early Release.

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A country's economy and its energy use, particularly electricity use, are linked. Short-term changes in electricity use are often positively correlated with changes in economic output (measured by gross domestic product (GDP)). However, the underlying long-term trends in the two indicators may differ. All else equal, a growing economy leads to greater energy and electricity use. However, in developed countries like the United States, the relationship has been changing for some time, as economic growth now outpaces electricity growth.

As suggested by data over the past 60 years, EIA's Annual Energy Outlook 2013 Reference case projections through 2040 show that U.S. electricity use and economic growth will continue to be linked. However, the long-run trend of slowing growth in electricity use relative to economic growth will also continue: the rate of projected growth in electricity use will be less than half the rate of economic growth. In particular, EIA does not expect any sustained return to the situation between 1975 and 1995, when the two growth measures were nearly equal in value, or the earlier period in which the growth rate in electricity use far exceeded the rate of economic growth.

Absent a very rapid introduction of some new electricity-using device—perhaps electric vehicles—a sharp rebound in electricity demand growth is not expected. While there is always uncertainty about future electricity demand, the efficiency standards for lighting and other appliances that have been in place over the past few years will continue to put downward pressure on growth as new equipment is added and existing stock is replaced. For example, a new refrigerator purchased today uses less than a third as much electricity as one purchased in the late 1970s, despite the larger size of today's refrigerators (see chart below).

 

Source: U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, Building Technologies Office.
Note: The standards are expressed as the maximum annual energy consumption for a product as a function of the product's adjusted volume.

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The growth in electricity demand has been significantly slower than GDP growth for decades. In the 1950s, 1960s, and 1970s the use of electricity often increased more than 5% per year. It then slowed to 2% to 3% per year in the 1980s and 1990s, and over the past decade it has fallen to less than 1% per year. Over the next three decades, electricity use is expected to continue to grow, but the rate of growth slows over time. The factors driving this trend include slowing population growth, market saturation of major electricity-using appliances, improving efficiency of several equipment and appliance types in response to standards and technological change, and a shift in the economy toward less energy intensive industry.

Source: EIA

Xcel Sets Wind Energy Record

At 8 p.m. on Feb. 17, Xcel Energy achieved a milestone when a record 1,713 megawatt-hours of electricity was generated by locally sourced wind power, representing nearly 33 percent of the company’s Upper Midwest customer electricity needs.

Wind farms produced almost 12 percent of the energy used by Xcel Energy’s Upper Midwest customers in 2012, putting the company well ahead of milestones established by Minnesota’s Next Generation Energy Act. That law establishes that Xcel Energy will generate 30 percent of its energy from renewable sources by 2020, of which 25 percent will be from wind resources. 

Xcel Energy is currently considering additional wind resources in Minnesota. On Feb. 15, the company issued a request for proposals for up to 200 megawatts of wind resources to come on line in time to qualify for the newly extended federal Production Tax Credit.

Source: Xcel Energy press release

Ethanol Producers Respond to Market Conditions

 

Source: U.S. Energy Information Administration, and U.S. Department of Agriculture Agricultural Marketing Service.

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Beginning in summer 2012, the prices of ethanol and corn reached levels where production costs at relatively simple ethanol plants exceeded revenue. These simple plants, which are not able to recover corn oil, make up a diminishing portion of the ethanol industry. Reacting to the market conditions, several ethanol plants temporarily shut down. By January 2013, the number of idled ethanol plants had grown to at least 20.

Relatively simple ethanol plants produce ethanol and distillers grains from corn. More advanced plants are able to recover other products, like corn oil, from a portion of the distillers grains. Ethanol plants with corn oil recovery units are able to earn more revenue, so they usually have higher profit margins than plants without corn oil recovery, even if their production costs are slightly higher.

Over the past few years, margins at plants with corn oil recovery have been 15-20 cents per gallon higher than at plants without it, meaning their margins have remained positive, while margins at plants without corn oil recovery were negative. Each time margins at the simple plants turned negative, several of these less sophisticated plants announced shutdowns, including plants in Nebraska, Illinois, and Minnesota.

Profit margins also affect ethanol production, prices, and consumption. Following the first set of plant shutdowns, a rise in margins resulted in more domestic ethanol production, which helped reduce prices and resulted in higher ethanol consumption through July. Then, at the beginning of August, a drop in margins led to lower production, reducing ethanol stocks to their lowest level since December 2011. This pattern illustrates how sudden changes in supply (e.g., shutdowns) can lead to short-term market volatility.

 

Source: U.S. Energy Information Administration.

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During plant shutdowns, some companies have embarked on new capital projects to recover corn oil, while others are performing routine maintenance and looking for opportunities to buy corn economically. Two plants, POET Biorefining in Macon, Missouri, and Abengoa in Madison, Illinois, may add corn oil recovery units in 2013. Others, such as an ADM facility in Walhala, North Dakota, could shut down permanently.

Corn oil recovery is one of several strategies that the ethanol industry is developing to improve margins. Others involve switching to processes that are more advantageous under the renewable fuels standard. For instance, Aemetis in Keyes, California, is changing its feedstock from corn to sorghum and replacing its natural gas consumption with biomass. Other companies plan to produce butanol rather than ethanol, or integratecellulosic feedstock, such as wood waste or corn stover (e.g., leaves, stalks, and leftover cobs after the corn harvest). These approaches allow their products to qualify as advanced biofuels under the RFS, a category that specifically excludes ethanol produced from cornstarch, which has been the dominant feedstock for the U.S. ethanol industry.

Source: EIA

New Bill Would Increase Clean Energy in Minnesota

SAINT PAUL, MN – Energy legislation aimed to increase the deployment of solar energy and other clean energy in Minnesota was introduced on Monday, February 25 in the Minnesota House, according to a March 5 press release from the Minnesota Department of Commerce, Division of Energy Resources.

The bill, House File 956/Senate File 901 sponsored by Rep. Melissa Hortman and Sen. John Marty, Chairs of the House and Senate Energy Policy Committees, would amend Minnesota’s 30-year-old net-metering law by increasing the cap on net-metered systems from 40 kilowatts to 1,000 kilowatts (or 1 megawatt) for customers and facilities that offset their energy use through renewable energy sources such as solar and wind. The bill would also expand opportunities for small businesses to install solar projects and would set minimum solar electricity generation standards for utilities.

“This clean-energy legislation will help move Minnesota forward to generate more solar and wind energy,” said Commerce Commissioner Mike Rothman. “It will allow more opportunities for businesses to offset their energy use with renewable energy generated onsite. This bill will help create more clean energy jobs, diversify the resources used to meet our energy needs, and provide a long-term policy signal to develop a stable solar market in Minnesota.”

Minnesota was the first state to establish a net-metering standard in 1983. The current net-metering law provides a 40-kilowatt limit on net-metered systems, which serves some residential and small business customers fairly well. But increasing the limit to 1,000 kilowatts would enhance the development of important local energy resources for larger energy use customers such as bigger businesses, which could offset large percentages or all of their electric use with solar or other clean energy.

In addition, the legislation calls for establishing a solar electricity standard that would require a specified percentage of electric utilities’ total retail sales to retail customers in Minnesota to be generated by solar energy by 2016, 2020 and 2025. 

Another component of the bill includes language that removes a barrier in state law for third party financing of solar projects.  This provides an opportunity for individual homeowners who would not be able to invest in solar, to join with other investors in purchasing a solar project.  This model has been successful in other states as a tool to spur solar energy production. 

Source: Minnesota Department of Commerce press release

EIA Updates Home Energy Use Trends

 

Source: U.S. Energy Information Administration, Residential Energy Consumption Survey.
Note: Amounts represent the energy consumption in occupied primary housing units.

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For decades, space heating and cooling (space conditioning) accounted for more than half of all residential energy consumption. Estimates from the most recent Residential Energy Consumption Survey (RECS), collected in 2010 and 2011 and released in 2011 and 2012, show that 48% of energy consumption in U.S. homes in 2009 was for heating and cooling, down from 58% in 1993. Factors underpinning this trend are increased adoption of more efficient equipment, better insulation, more efficient windows, and population shifts to warmer climates. The shift in how energy is consumed in homes has occurred even as per-household energy consumption hassteadily declined.

While energy used for space conditioning has declined, energy consumption for appliances and electronics continues to rise. Although some appliances that are subject to federal efficiency standards, such as refrigerators and clothes washers, have become more efficient, the increased number of devices that consume energy in homes has offset these efficiency gains. Non-weather related energy use for appliances, electronics, water heating, and lighting now accounts for 52% of total consumption, up from 42% in 1993. The majority of devices in the fastest growing category of residential end-uses are powered by electricity, increasing the total amount of primary energy needed to meet residential electricity demand. As described in yesterday's Today in Energy, increased electricity use has a disproportionate effect on the amount of total primary energy required to support site-level energy use.

Other notable trends in household energy consumption include:

• The average U.S. household consumed 11,320 kilowatthours (kWh) of electricity in 2009, of which the largest portion (7,526 kWh) was for appliances, electronics, lighting, and miscellaneous uses.
• On average, residents living in homes constructed in the 1980s consumed 77 million Btu of total energy at home. By comparison, those living in newer homes, built from 2000 to 2009, consumed 92 million Btu per household, which is 19% more.
• Space heating accounted for 63% of natural gas consumed in U.S. homes in 2009; the remaining 37% was for water heating, cooking, and miscellaneous uses.

In the past, EIA reported household energy data for the United States, for census regions and divisions, and for the four most populous states: California, Texas, New York, and Florida. In the 2009 RECS, EIA expanded the household data series to include 12 more states: Arizona, Colorado, Georgia, Illinois, Massachusetts, Michigan, Missouri, New Jersey, Pennsylvania, Tennessee, Virginia, and Wisconsin.

Source: EIA

Two Perspectives on Household Energy Use

 

Source: U.S. Energy Information Administration, Annual Energy Review 2011, Table 2.1b.

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Electricity and natural gas now account for approximately equal amounts of the energy consumed on site in U.S. households. But because it takes on average nearly three units of energy from primary fuels such as coal, natural gas, and nuclear fuel to generate one unit of electricity, increased electricity use has a disproportionate impact on the amount of total primary energy required to support site-level energy use. Electricity-related losses explain the difference between energy consumption in the residential sector as measured by energy consumption on site (left) and energy consumption of primary fuels (right).

Unlike natural gas consumption in the residential sector, which has remained nearly flat for decades, and consumption of other fuels, which has declined, the use of electricity in the residential sector has grown. Electricity powers dozens of machines in homes, including heating and cooling equipment, cooking appliances, refrigerators, dishwashers, and an ever-growing number of home entertainment and rechargeable devices. Although many electric end-uses are covered by federal efficiency standards or voluntary programs like ENERGY STAR®, increases in both the percentage of homes with those devices and, in the case of electronics like televisions and computers, the number of devices per household have offset efficiency gains in residential electricity use.

For example, according to EIA's Residential Energy Consumption Survey (RECS) in 1993, only 22% of households had three or more televisions, and less than 45% used central air-conditioning. By 2009, nearly half of all homes contain three or more televisions, and more than 60% use central air-conditioning.

Increasing electricity consumption within homes has broader implications for total energy use. In 1950, electricity generators used nearly five units of primary energy to generate one unit of electricity. By 2011, changes in the generation mix and improvements in technology lowered this value to 3.1 units of primary energy for every unit of electricity.

Historical time-series data for commercial, industrial, and transportation are available in the Annual Energy Review, and projections are available in the Annual Energy Outlook.

Source: EIA

Coalition Proposes 50% Renewable Energy Standard

A coalition representing more than 30 organizations from clean energy, labor, and business have initiated the "Minnesota Clean Energy & Jobs" campaign by proposing that half the power produced in the state be from renewable sources by 2030, accoding to an article in the St. Paul Pioneer Press.  The group is calling for 40 percent to be from renewable sources such as wind energy with the other 10 percent from solar, saying that the wind industry already has created 3,000 jobs in Minnesota and that the new solar standards would create 2,000 more.  In 2007, Minnesota set a standard of roughly 25 percent from renewable sources by 2025. Read more