Where are electricity demand reductions coming from? Not from where we hoped

Electricity demand has fallen substantially in the last couple of years and shows no sign of recovery. The cause could be: * The impact of economic slowdown * Better energy efficiency * Demand reduction because of the high prices seen in recent years.

If the cause is the contraction in the economy, then we can expect electricity use to rise again when growth resumes. On other hand if it is energy efficiency, then it is reasonable to expect that the reduction will persist. Electricity demand is usually thought to be insensitive to the price of power. If it is high prices that are driving usage reductions, we have gained important information about how to reduce electricity use, and thus carbon emissions.

The conclusion of the analysis in this short note is that almost all of the reduction in energy demand comes from cuts in usage in big industrial and commercial users. This means that the most likely cause of the cut is the fall in economic activity. Household demand seems to have remained about constant.

Read More