Electricity Demand Peaks Are Becoming More Problematic
Research Round-up
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Today’s round-up discusses:
North America’s Electricity Challenge
Electricity Demand Peaks Are Becoming More Problematic
Electricity providers in cold countries have always had more challenges in winter months than summer: the demand for heating (typically from 6 to 9 a.m. and 4 to 8 p.m) can account for up to 80% of a household’s total electricity demand. In warmer climates, this is obviously reversed with summer posing more challenges given air-conditioning related electricity consumption.
We found recent reports about electricity shortages during last week’s North American cold snap particularly alarming and a good reminder that the energy transition won’t be without a lot of bumps.
Alberta, a province well known for its energy wealth, came precariously close to running out of electricity last week. And in Quebec, although the winter has been comparatively mild, Hydro Quebec (HQ) opted to reach a last-minute agreement with a forestry company to purchase power produced by its paper mill. Given HQ is a public monopoly, private companies previously only had the right to operate their own hydroelectric power stations to meet their own needs and could not sell it to other entities. Â
The North American Electric Reliability Corporation (NERC) is the regulatory authority that is charged with overseeing the reliability and security of the electric grid. For the first time, Quebec appears on the list of jurisdictions at risk of insufficient operating reserves (see map below1).
How can this happen? Especially to two jurisdictions that are poster children for North American energy abundance!? To be sure, load forecasting in winter is complex and is getting even harder. According to NERC, irregular weather patterns characterized by strong cold fronts, wind, and precipitation has caused demand for electricity to deviate significantly from historical forecasts. Meanwhile, increasing levels of variable output (e.g. solar) add to the load forecast uncertainty.
By and large, however, the potential for electricity shortages is simply supply not keeping up with demand during both peak and non-peak periods. In a recent article, Andrew Leach argues that in the case of Alberta, problems amount to project delays: two significant projects that should have been brought on-line by the end of 2023 were not. Meanwhile, the demand for electricity has skyrocketed across North American cold regions, as heating is becoming increasingly broadly electrified.
 Over the past year, North American grid planners have nearly doubled their 5-year load growth forecast; in the U.S. electricity demand is now expected to increase by 4.7% over the next five years. By way of comparison, over the past decade, grid planners have been forecasting a mere 0.5% annual growth rate. The main drivers of demand are investment in new manufacturing, industrial, and data center facilities.
It often can take over a year to bring new generation online (and even longer to build new transmission connections).
Electricity rationing has been heretofore a foreign concept for the North American economy, but without drastic, aggressive investment, energy production may become at least a temporary headwind to growth in some energy intensive industries. Stay tuned.
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