Growth in U.S. electricity demand has seen several long-term trends that many thought were stable. However, unexpected reductions in yearly growth rates of electricity consumption have caused considerable angst in this capital-intensive industry. This includes suppliers such as the barge industry.
Post-World War II domestic demand for electricity grew at a very rapid rate. In the 1950s, 1960s and 1970s, electricity use often increased more than 5% per year, according to the U.S. Energy Information Administration’s Annual Energy Outlook 2013. Major reasons were an expanding household base, suburbanization and proliferation of energy consuming household appliances, air conditioning, and manufacturing growth. It then slowed to 2% to 3% per year in the 1980s and 1990s, and over the past decade it has fallen to less than 1% per year, according to the EIA. Over the next three decades, electricity use is expected to continue to grow, but the growth rate will slow over time.
The utility industry had treated the historical postwar annual growth rate of over 5% like a savings bond that would simply grow and pay that rate forever. Consequently, there were major adjustments to outdated growth forecasts and planned capacity expansions at just about the same time that the industry had significant new capacity investments coming on line.
The close of the previous decade is when the latest phase of “no growth” began. In an industry where growth had always been assumed, albeit at increasingly lower rates, no growth has come with steep sticker price shock. In the absence of growth, increased costs have to be covered by higher rates that tend to further decrease consumption.
The barge industry has been a major supplier of steam coal to river-based electricity generating plants. Just as utilities did, the barge industry had also banked on increases in demand, capacity and coal consumption. This is no longer the case, notwithstanding declines in coal from alternative fuels, etc.
Yearly increases in electricity demand can no longer be assumed. Thus, river systems that are heavily utilized by steam coal can expect stagnating volumes under the best of conditions.
