US Power Use Tumbling With Recession
Date: 31-Mar-09
Country: US
Author: Scott DiSavino and Eileen O'Grady
ANALYSIS - US Power Use Tumbling With Recession Photo: Tim Wimborne
High voltage powerlines cross a field on the outskirts of
Sydney about 40 km (26 miles) west of the city's centre September 30, 2004.
Photo: Tim Wimborne
NEW YORK/HOUSTON - US electricity demand will continue to shrink in 2009 as
the economic meltdown hits industrial power consumption, but a rebound could
come in 2010.
Bigger houses, a myriad of electric devices and an expanding economy have
kept US power use on a nearly uninterrupted climb for 25 years - until the
recession put the brakes on industrial demand in 2008.
Electricity sales to industrial customers are expected to shrink 6.4 percent
this year, leading to an expected 1.7 percent drop in overall power
consumption in 2009, the US Energy Information Administration said in its
most recent outlook.
EIA, which provides data and analysis for the US Department of Energy, said
in another report industrial consumers bought 11.4 percent less power in
January 2009 compared with the same time last year.
"Industrial demand will cycle deeper than residential (use) because
industrial demand is even more sensitive to the business cycle," said
Lawrence Makovich, vice president of the global power group at Cambridge
Energy Research Associates.
EIA expects the downturn to reverse course in 2010, with 1.2 percent growth
in electric output as the economy slowly returns to life.
PJM, the biggest power grid in North America, forecast a 1.4 percent drop in
peak demand this summer compared with 2008, based on normal weather
conditions.
Demand in the 13 mid-Atlantic and Midwest states that PJM serves should
rebound in 2010 but not surpass levels seen in 2008 until 2011.
INDUSTRIAL DOWNTURN
Weather is the dominant factor affecting power demand but has the biggest
impact on residential and commercial use, sectors expected to remain
relatively flat this year.
Examples of declining industrial demand, which makes up about a quarter of
US electric consumption, are easy to find.
Minnesota Power, a unit of Allete Inc of Duluth, Minnesota, expects power
demand from taconite miners, its biggest customers, to fall by 40 percent
this year.
Taconite miners use electricity to process iron-bearing rock into pellets
used to make steel. The demand for steel has plunged in the current economy.
In the petrochemical-dominant Houston area, non-residential power sales fell
5.5 percent in February, according to CenterPoint Energy Inc, a power
delivery company.
February marked the third month that CenterPoint showed non-residential
sales lagging the year-earlier month.
To conserve cash, power companies have deferred spending by about 10
percent, or US$7 billion to $8 billion, according to an informal survey by
Edison Electric Institute (EEI), an association of shareholder-owned power
companies.
American Electric Power Co Inc, with customers in 11 states, cut its 2009
capital budget by more than 20 percent or $750 million, the company said.
The financial crisis is delaying investment in energy infrastructure at the
same time new environmental mandates are requiring substantial increases in
generation and transmission needed to limit air emissions and boost
renewable supplies.
CERA's Makovich expects utilities to pare overall capital spending by as
much as 20 percent by the end of the year due to lower revenue and increased
bad debt.
"When we get to 20 percent or more, I start to worry about the
consequences," said Makovich. "That doesn't hurt you now but can down the
road when projects were supposed to be done and demand rebounds."
PJM projected peak demand growth would return to a more normal 1.7 percent
per year over the next decade.
"The economic downturn has delayed the need for new infrastructure, but has
not eliminated it," PJM spokesman Ray Dotter said.
(Editing by Marguerita Choy)
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