Commentary: The mysterious case of disappearing electricity demand



14 February 2019

Electricity demand in advanced economies, such as many countries in Europe, has begun to flatten or in some cases decline (Photograph: Shutterstock)

Electricity is at the heart of modern life, and so it’s easy to assume that our reliance on electricity will increase or even accelerate. However, in many advanced economies the data reveals a surprisingly different story.

Electricity demand has increased by around 70% since 2000, and in 2017, global electricity demand increased by a further 3%. This increase was more than any other major fuel, pushing total demand to 22 200 terawatt-hours (TWh). Electricity now accounts for 19% of total final consumption, compared to just over 15% in 2000.

Yet while global demand growth has been strong, there are major disparities across regions. In particular, in recent years electricity demand in advanced economies has begun to flatten or in some cases decline – in fact electricity demand fell in 18 out of 30 IEA member countries over the period 2010-2017. Several factors can account for this slowing of growth, but the key reason is energy efficiency.

	Observed	Without energy efficiency	Without additional electrification since 2000
2000	8405.931161	8405.931161	8405.931161
2001	8445.599694	8488.662587	8426.538547
2002	8639.902586	8741.147587	8583.499753
2003	8778.422715	8938.190677	8719.564708
2004	8981.42207	9272.072226	8904.286838
2005	9183.870331	9631.955403	9077.709189
2006	9286.621621	9915.732179	9111.908237
2007	9497.106946	10244.59528	9281.175285
2008	9479.583722	10237.24589	9271.58972
2009	9112.379204	10000.19868	8830.247274
2010	9513.508868	10313.58991	9210.559061
2011	9485.5193	10568.09139	9143.634115
2012	9463.769866	10544.73768	9141.380805
2013	9513.327953	10672.70609	9170.090562
2014	9459.260443	10857.20176	9100.729425
2015	9482.930485	11013.31639	9153.08946
2016	9615.570075	11210.28945	9270.10933
2017	9687.07667	11450.05288	9340.764102
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	Savings
Industry	727.1549624
Services	532.4241207
Residential	503.3971308
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There have been a range of new sources of electricity demand growth in advanced economies, including digitalization and the electrification of heat and mobility. However savings from energy efficiency have outpaced this growth. Energy efficiency measures adopted since 2000 saved almost 1 800 TWh in 2017, or around 20% of overall current electricity use.

Over 40% of the slowdown in electricity demand was attributable to energy efficiency in industry, largely a result of strict, broadly applied, minimum energy performance standards for electric motors. In residential buildings, total energy use by certain classes of appliances has already peaked. For example, energy use for refrigerators (98% of which are covered by performance standards) is well below the high point reached in 2009, and energy use for lighting has also declined. In the absence of energy efficiency improvements, electricity demand in advanced economies would have grown at 1.6% per year since 2010, instead of 0.3%.

Changes in economic structure in advanced economies have also contributed to lower demand growth. In 2000, around 53% of electricity demand in the industrial sector came from heavy industry, but by 2017 this figure had fallen to less than 45%.  Advanced economies now account for 30% of global steel production, for example, down from 60% in 2000, and for 25% of aluminium production, also down from around 60% in 2000.

Finally, electricity demand for heat and mobility increased by only 350 TWh between 2000 and 2017. Today, electric cars represent only 1.2% of all passenger vehicle sales in advanced economies and account for less than 0.5% of the passenger vehicle stock. Since 2000, only around 7% of households in advanced economies have switched from fossil fuels (mainly gas) to electricity for space and water heating purposes, and use of electricity for meeting heat demand in the industrial sector remains marginal. In many regions, the price of electricity relative to fossil fuels limits its competitiveness for heating end-uses.

When we look to the future, the pace of electrification is set to pick-up somewhat in advanced economies. Nonetheless, electricity demand growth is projected to remain sluggish in the IEA’s New Policies Scenario (NPS), as improvements in energy efficiency continue to act as a brake on increasing demand for many end-uses. In addition, fewer purchases of household appliances (most households in advanced economies today own at least one of each major household appliance such as refrigerators, washing machines and televisions), and a shift from industry to the less electricity-intensive services sector, all contribute to lower electricity demand growth.

On average, electricity demand in advanced economies is projected to grow at just 0.7% per year to 2040 in the NPS, with the increase largely due to digitalization and policies that incentivise the use of electric vehicles and electric heating. Without those policies, electricity demand would continue to flatten or even decline in many advanced economies.

Electricity demand in advanced economies and demand without efficiency policies or without further electrification
	Without additional energy efficiency policies	New Policies Scenario	Without additional electrification of heat and mobility
2017	9687.07667	9687.07667	9687.07667
2018	9974.442785	9782.248974	9771.679591
2019	10306.46955	9884.595209	9857.340849
2020	10518.67564	9932.013439	9885.945016
2021	10728.32315	9978.938443	9912.331537
2022	10931.8106	10021.80355	9934.175418
2023	11123.62461	10067.19694	9957.074491
2024	11323.76843	10122.40734	9987.248657
2025	11512.95515	10176.25836	10014.60566
2026	11687.92204	10241.93872	10056.36675
2027	11859.36748	10303.32387	10091.84126
2028	12028.31005	10367.33786	10129.08744
2029	12199.615	10434.51204	10165.86835
2030	12377.16326	10503.81423	10205.00878
2031	12558.20736	10577.04771	10238.0898
2032	12740.8123	10651.43844	10272.48712
2033	12924.52534	10729.67773	10306.39085
2034	13109.31778	10807.73462	10340.13423
2035	13294.72063	10885.91692	10373.77518
2036	13483.82843	10968.56744	10410.22336
2037	13677.36938	11060.92367	10456.25398
2038	13863.85871	11147.30741	10498.07641
2039	14049.25213	11233.96945	10540.18507
2040	14232.17707	11320.771	10582.6989
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There are other factors at play. For example, population growth in many advanced economies is barely exceeded by electricity demand growth, meaning that further growth in GDP per capita does not lead to an increase in electricity demand per capita (as an exception, the industry sector in Korea accounts for a large share of electricity demand, and so it is one of the few advanced economies that sees industry contribute to overall electricity demand growth on a per capita basis).

 
 

Ultimately, despite moderate growth in electricity demand, fuel-switching to electricity and energy efficiency improvements in the use of other fuels mean the share of electricity in final consumption is projected to increase to 27% in advanced economies by 2040, up from 22% today.

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