Electricity in Economic Growth (1986) / Chapter Skim
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5. Future Economic Influences on Electricity Use
5. Future Economic Influences on Electricity Use
Pages 110-132
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From page 110... ...
what major factors are likely to influence future electricity consumption patterns relative to gross national product (GNP)
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From page 111... ...
First we review several recent forecasts of average annual g rowth rates of electricity consumption and GNP to illustrate their disparity. This background material is followed by discussions of the chang ing composition of national output, the likely ef fects of electricity and alternative fuel price movements, conservation practices and potentials that might affect electricity consumption patterns, and a few observations about how the factors may affect the outlook for electricity use.
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From page 112... ...
Electricity prices and alternative fuel prices affect electricity consumption in two ways: first, they directly affect the use of electricity and nonelectric fuels as factors of production; second, they indirectly affect productivity growth and thereby economic growth. THE RANGE OF RECENT FORECASTS The Edison Electric Institute (1984)
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From page 114... ...
We shall see that the estimates diverge mainly because it is hard to quantify and predict rather than because it is assumed that departures will occur from the economic forces that have so far been present. THE CHANGING COMPOSITION OF NATIONAL OUTPUT Figure 2-6 illustrated that basically linear relationships have prevailed between electricity use and representative measures of economic activity in each of the three main sectors of the economy.
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From page 115... ...
The Industrial Sector Trends in Electricity Use The industrial sector used about 38 percent of all electricity consumed in 1983. In considering the future electricity consumption of this sector it is convenient to treat it in two parts -- for those industries that are (1)
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From page 116... ...
Offsetting the trends mentioned above is the prospect that new electricity-using technologies will tend to increase electricity use in the industrial sector relative to economic output. Table 4-8 gave examples of these technologies, with attention to their applications for productivity growth.
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117 In o Jo Rio .-, o U)
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In summary, then, some important determinants of future industrial electricity use are the relative growth rates of the electricityintensive and the non-electricity-intensive industries; the introduction of new, more efficient electric motors to replace existing, less efficient models; and the introduction of new industrial electrotechnologies. The prices of electricity and alternative fuels will also be important in influencing future electricity use in this sector.
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From page 120... ...
is a good start at assembling this data base, but projecting additions to this stock is problematic. Second, it is hard to assess how various determinants of future electricity use in this stock -- such as the prices of electricity and alternative fuels, heating and cooling equipment ef f iciencies, building envelope designs, and var ious retrof it measures -- will af feet the electricity use in both existing and new commercial building stock.
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From page 121... ...
Growth in the penetration of electric heating and cooling tends to increase electricity use, while increasing appliance eff iciency and building thermal performance tend to decrease use. Any trend toward increasing use would come primarily f rom growth in electric space-conditioning applications.
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From page 122... ...
Beyond these points, future electricity and fuel prices will play an important role in consumer choices that achieve residential electricity conservation. We turn, then, to discussing the likely effects of price movements.
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The central question about price in the context of this report is different: what will future fuel and electricity prices mean for the future electricity use-GNP relationship? Stated differently, if electricity prices increase or decrease relative to other fuel prices or other prices in the economy, what will the effects be on electricity use?
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From page 125... ...
For example, a change in electricity prices caused by changing fuel prices has a different effect than the same change caused by a change in the real cost of installing new generating plants. The different effects will be related to the price elasticities of electricity demand with respect to electricity and alternative fuels, and to the influence of the price changes on productivity growth rate.
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From page 126... ...
This decreased productivity growth rate will show up directly in decreased GNP growth rate and therefore in decreased electricity consumption, at least according to the linear relationship between electricity use and GNP discussed in Chapter 2. In the second case, the increase in electricity prices will also tend to decrease the rate of productivity growth, but without the additional depressing effect on productivity growth rate traceable to increased alternative fuel prices.
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From page 127... ...
n In other words, PG&E expects to be able to ~build" the equivalent of three typically sized nuclear power plants, by the year 2004, in the form of efficiency improvements within its service territory. Southern California Edison Company has been particularly innovative in load management.
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From page 128... ...
Such conflicts will be reduced only to the extent that information about potential ef f iciencies becomes commonly available to of f ice building purchasers and that those purchasers insist on such eff iciencies as criteria for purchase. The point is important in the present context because the conservation and load management prog rams being promulgated at all levels of government and by many electric utilities are designed to induce more eff icient energy use to overcome exactly such impediments.
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From page 129... ...
By the same reasoning, many improvements promulgated by the several levels of government and by utilities for increased efficiency of residential electricity use do not manifest the direct sectoral and macroeconomic benefits that similar improvements might afford in the industrial and commercial sectors. In another way, however, all means of consuming electricity more efficiently, particularly those that reduce peak demands, are indirectly beneficial.
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From page 130... ...
THE OUTLOOK To return to the questions raised at the beginning of this chapter, the principal forces that have shaped the relationship between electricity use and GNP in the past will probably continue to operate in the future. A linear relationship between the two quantities has persisted for many years, despite relatively large shifts in the composition of national output and large shifts in electricity and alternative fuel prices in the past decade.
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From page 131... ...
Moreover, the dual interaction between electricity and the economy, namely, the correlation of consumption with GNP and the effect of electricity-using technical change and electricity prices on the productivity growth rate, should be considered in developing federal and state energy and economic policies.
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From page 132... ...
Edison Electric Institute.
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