March 28, 2016

...AND CHEAPER...:

Electricity Sales Have Dropped--Why Is This News? (Leonard Hyman and William Tilles, 3/28/16, Oilprice.com)

Electricity sales have declined in five of the last eight years. From 2008 to 2015, the economy produced one of its longest sustained recoveries. Real GDP rose 12.7 percent but electric retail sales declined 0.3 percent. [...]

Our economy started to learn how to operate with decreasing amounts of electricity per dollar of output in the 1970s, before industry began to move to China. Per capita growth of electricity sales peaked roughly 15 years ago.

By now, the pundits, if they want to do something useful, might explain why those trends won't continue, rather than going on about energy conservation and a poor economy. We've known about energy conservation for a long time, and the increasingly weak linkage between electric sales and the economy manifested itself decades ago. People just didn't pay attention. These trends have significant financial and investment implications.

First, renewable resources have been supplying an increasing portion of power. Worldwide, renewables make up roughly half of new generating capacity additions, and American numbers are similar. Non-utilities produce much of this renewable output. Thus, when the overall market for electricity is flat or declining, making room for more renewables means taking market share away from existing generators (often owned by the traditional utilities). That is the situation faced by many European utilities.

In the U.S. last year, total electricity generated, including solar power on customers' roofs rose 6 TWH but generation from renewables rose 30 TWH, so the traditional generators lost business. Coal, incidentally, lost a big share of the market, and the reports that Peabody might file for bankruptcy, after several years of losses, indicates how badly coal has been hit - not so much because of a war against it but due to the weakness of coal's biggest customer, the electric utility industry.

Posted by at March 28, 2016 3:15 PM

  

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