Turning Negawatts Into Megawatts

In 1985, Rocky Mountain Institute co-founder Amory Lovins coined the term “negawatt” to describe the value of electricity not used, either through improved energy efficiency or reduced consumption. At the time, he was considered a bit of a fringe thinker. After all, how could our economy continue to grow without new generating plants to boost us on our way? The latest data from the U.S. Energy Information Administration (EIA) indicates we have learned to value those negawatts, and the great decoupling of economic growth from energy consumption might well be underway.

The July EIA report was illustrated with two simple line graphs that tell a challenging story for the nation’s electric utilities. Between 2010 and 2016, per capita U.S. residential electricity sales fell 7 percent or 3 percent on an absolute basis. Per-household sales, which weren’t charted, fell 9 percent.

The EIA’s sales projections from 2016 show total annual sales growth (including commercial and industrial use, along with residential sales) averaging a meager 0.7 percent from 2016 to 2040. This is despite an annualized GDP growth rate now pegged at 2.6 percent. Simply, we’re doing more with less.

The EIA doesn’t attribute the shift to improved efficiency, but it is part of the equation. Some year-to-year variations can be attributed to weather. For example, several Southern states saw both double-digit sales declines and significantly fewer heating days between 2010 and 2016. In some states, residential solar panels are taking a bite out of sales. In 2016, the systems generated the equivalent of 15 percent of residential-sector sales in Hawaii, 6 percent in California and 3 percent in Arizona.

But energy efficiency—a whole lot of negawatts—is responsible for much of the longer-term decline in residential sales. Many state regulatory agencies are pushing utilities to invest in efficiency-improvement efforts, with incentive spending that averaged $3.92 per person from 2013 through 2015. National efficiency standards for heat pumps, air conditioners, lighting and other equipment also are being reflected in sales figures, as older products are replaced with more efficient models.

Lighting, in particular, is becoming a major savings contributor. The 2007 Energy Independence and Security Act set performance targets for light bulbs that have driven adoption of compact fluorescent and LED lamps in place of incandescents. In the EIA’s 2009 Residential Energy Consumption Survey, 58 percent of all households reported using at least one energy-efficient lamp indoors, a figure that climbed to 86 percent in the 2015 survey. Nationwide, 18 percent of households reported having no incandescent lamps. Consider the impact of millions of 60-watt (W) incandescent lamps being replaced with 9W LEDs, and you’ll understand just how quickly those negawatts have added up.

These trends aren’t a surprise to utilities, and they are a big reason why many of them are getting out of generating and reconsidering their business models. State regulators recognize that current utility compensation plans might no longer be sustainable. Utilities earn a guaranteed rate of return on their investments in physical infrastructure, such as generating stations, substations and transformers. That return is paid in the form of the per-kilowatt-hour delivery or service charge on your monthly electricity bill. Fewer kilowatt-hours sold mean either falling returns for utility shareholders or a need to hike service charges to make up the difference.

There is one bright spot that is currently barely a blip on electricity sales charts: transportation. Electric vehicles (EVs) make up only 0.3 percent of U.S. retail electricity use, but that market is expected to grow over the next two decades, thanks largely to rapidly falling lithium-ion battery costs. OPEC boosted its 2040 estimates for EV sales by 500 percent over figures from just last year. Additionally, BP, Exxon and Statoil all are expecting 100 million EVs to be sold worldwide between 2030 and 2035. The International Energy Agency has doubled its EV sales projections. In its 2017 Electric Vehicle Outlook, Bloomberg New Energy Finance (BNEF) anticipates EVs will be responsible for boosting global electric power consumption by 5 percent.

Interestingly, the largest automakers are missing in this lineup of optimistic EV forecasts. BNEF says the manufacturers are only planning to sell a combined 8 million EVs by 2030. This could open up a new opportunity for the utilities. Turning their generating stations into EV manufacturing plants might be the answer they’re looking for to turn their negawatts back into megawatts.

About the Author

Chuck Ross

Freelance Writer

Chuck Ross has covered building and energy technologies and electric-utility business issues for a range of industry publications and websites for more than 25 years. Contact him at chuck@chuck-ross.com.

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