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Demand Growth and the New Normal

Five forces are putting the squeeze on electricity consumption.

Fortnightly Magazine - December 2012

operators balance electric demand and supply. As seen in Figure 4, new codes and standards could dramatically decrease baseline energy consumption. In fact, the EIA attributes declining per capita residential electricity sales to new federal lighting standards in the Energy Independence and Security Act (EISA) of 2007, which took effect on Jan. 1, 2012. The act stipulates that general-service lamps providing 310 to 2,600 lumens of light are required to consume 30 percent less energy than typical incandescent bulbs, and compact fluorescent and LED lamps replace low-efficiency incandescent lamps. As a result of these standards, the EIA estimates that delivered energy used for lighting per household will fall by 827 kWh per year by 2035, a 47 percent decrease from the 2010 level.

Programs such as ENERGY STAR and the Leadership in Energy and Environmental Design (LEED) that promote energy efficiency are gaining more traction and support (see Figure 5) . ENERGY STAR is a government testing and labeling program that promotes energy efficiency products for the home and businesses. Through increased efficiency, products such as refrigerators and computers can reduce emissions and save money through the use of less electricity.

Like ENERGY STAR, LEED has improved public awareness by providing a framework for green building design, construction, operation, and maintenance. LEED uses a point-based system (0 to 100) to give building projects scores for satisfying these criteria. Building projects awarded a score of 80 points and above are given the highest certification—Platinum. The other certification levels, in descending rank, are Gold, Silver, and Certified. LEED has made designing buildings with energy efficiency in mind an attractive option for businesses to both save operating costs and to look good in the public eye. LEED certification has even been shown to increase the market value of properties, pushing many businesses and building designers to keep energy conservation and efficiency in mind when constructing or renovating buildings. The U.S. Green Building Council estimates that LEED certification increases a building’s value by 10.9 percent for new construction projects and 6.8 percent for existing sites.

Distributed Generation

Distributed generation with net metering could further reduce electricity demand significantly in the coming years. Distributed generation (DG), such as rooftop solar photovoltaic (PV) panels and microturbines, is producing a growing share of the overall electricity supply. While that share remains tiny today, the Energy Information Administration predicts significant increases in distributed generation, especially when complemented with investment tax credits and other policies, and particularly among commercial and small industrial end users. The EIA projects that both solar PV and microturbine electric generation additions between 2010 and 2035 will outpace the growth in conventional natural gas-fired cogeneration, wind, and fuel cells.

A key policy variable involves net metering, which enables distributed generation to expand. In 2003, there were less than 7,000 customers in the United States on net metering. By 2030, this number is expected to reach 156,000—mainly fueled by a rapid expansion of net metering in California, which will account for roughly half of this number. In California, the state’s 5 percent cap on net-metered customers is predicted