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Electricity sales look anemic

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Pity the poor electric utility executives. “Even though Americans are plugging in more gadgets than ever and the unemployment rate had dropped at one point to a level last reported in 2008, electricity sales are looking anemic for the seventh year in a row,” writes Rebecca Smith in the Wall Street Journal.

She explains that electricity sales are no longer keeping pace with GDP growth, and she cites several possible reasons. For example, energy-intensive manufacturing plants have moved overseas—that’s plausible.

But she also contends, “Americans have migrated to states with milder weather. And although it may seem counterintuitive, it takes less energy to keep houses cool in warm climates than to warm them in cold climates.”

OK, that’s also plausible—according to the Energy Information Association, in 1993 American homes consumed 53% of energy consumption on heating vs. 4.6% on cooling, and in 2009 the figures were 41.5% on heating and 6.2% on cooling. But Smith is writing specifically about electricity, and I don’t know too many people in the Northeast or Midwest who are heating their homes with electricity.

Daniel Gross in Slate adds his own take on Smith’s article—demand destruction. “Demand destruction,” he writes, “occurs when you eliminate or substantially reduce the need for the resource on a near-permanent basis. Somebody trading in a Chevrolet Malibu for a Nissan Leaf won’t be buying any gasoline for the next 10 years. Replacing a 30-year-old air conditioner with a more efficient new one will significantly reduce the power associated with cooling. Innovations in technology and business models can hasten the process of demand destruction—think of how the advent of iTunes cut into the sales of CDs. And there are signs that this is beginning to happen with electricity.”

See related article.

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