U.S. Electricity Use Expected to Grow 1.5% a Year Through 2026
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The International Energy Agency (IEA) predicts that increased manufacturing and electrification initiatives will cause U.S. electricity use to increase 1.5% annually from 2024-2026. Roughly 33% of this growth is expected to originate from the expanding data center sector. The burning question: how does this forecast impact electric utilities?
Details and Implications of the IEA Electricity Use Forecast
Interestingly, the predicted increase comes on the heels of a 1.6% decrease in 2023 (which followed a 2.6% increase in 2022). The 2023 decline was driven by milder summer and winter weather, as well as a decline in manufacturing caused by inflationary pressures and the auto industry strikes, among other factors.
According to the IEA’s Electricity 2024 report, the predicted 2024 increase will be driven in part by laws such as the Inflation Reduction Act that offer incentives to electrify – i.e., installing electric heat pumps, water heaters, and similar appliances that run on electricity. For example, 25 states and the Biden administration announced last Sept. that they want to quadruple the number of residential electric heat pumps in service, to 20 million units, by 2030.
As for the implications for the electric utility industry, well, it’s the same as it’s been for several years. The nation wants more electrification, which means, regardless of year-to-year fluctuations, the long-term trend points to higher and higher demand and usage.
Adding a level of complexity is the fact that coal plants are retiring and essentially being replaced by wind and solar production – the IEA expects coal-fired output to decline almost 10% per year through 2026. This is great for emissions but introduces a level of uncertainty as it relates to energy supply.
Overall, this is yet another indicator of how the utility industry is in transition. The supply mix is changing, and electricity use and demand will continue to increase over the long haul.
