This article was written by Michael Lawn, Energy Markets Specialist, at Bloomberg.
Demand for electricity in the United States has been stagnant since the global financial crisis of 2008, which broke a century long streak of uninterrupted growth. Stagnant demand is the result of improved energy efficiency e.g adoption of LED lighting, a dearth of any new energy intensive home applications , and declining manufacturing.
However, since the start of 2021 electricity demand across the US has not only recovered to pre-pandemic levels, but is showing strong growth even after adjusting for the weather. Year-to-date average power demand in the US is 18GW higher through mid-April 2022 than through this time last year; an increase of 4% – and some 20GW higher than the 5 year average. This growth in demand is outpacing even the rapidly growing renewable generation in the US – which is averaging 16% higher than this time last year – but in average energy terms is only up by 14GW.
The rapid growth in power demand is driving an increased call on flexible fossil-fuel powered generation. If sustained through the summer season this has the potential to make some US power markets tight this summer with corresponding increases in peak pricing.
Demand growth has been particularly strong in Texas’ ERCOT market, outpacing rapidly growing solar demand by an average 3GW. The market has been expecting rapidly growing solar installations to have a strong impact on the ERCOT market – particularly at times of peak demand – however the underlying load growth could offset this while making it even harder for ERCOT to manage evening peak demand this summer.
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