As technology upends grid fundamentals, is load forecasting a crapshoot?
Systemic changes to the electricity system make load predictions more difficult, but may also lessen the impacts of mistakes.
Each year, electricity consumers in the United States spend billions more than necessary to keep the lights on, in large part because the utility sector has been overestimating its needs.
For decades, the United States saw its demand for electricity rise at steep and steady rates. From the 1950s through the 70s, the U.S. Energy Information Administration (EIA) says demand often increased by more than 5% — faster than the economy grew. In the 1980s and 90s, growth slowed but still ticked along at 2% to 3% annually.
Since then, however, much has changed. Technology has advanced, the country came through the Great Recession from 2007 to 2009 and power markets have been restructured. Electricity demand growth has fallen to less than 1%, and some regional transmission operators are predicting declining loads.
Last year, retail electricity sales in the United States fell by 80 billion kWh according to the EIA — the largest drop since the economic recession in 2009, and represented retail sales in the residential, commercial and industrial sectors.
Analysis from the Rocky Mountain Institute (RMI) last year concluded load predictions have consistently over-forecast by 1% each year. That means a decade-out planning strategy results in a 10% over-estimation of demand, leading to billions of dollars in unneeded investment.
“You don’t have to rely on multi-decade forecasts because you don’t need to build things with five-year-plus lead times.”
Principal with RMI’s electricity practice
Mark Dyson, a principal with RMI’s electricity practice, says the United States has 40 GW of excess capacity, above and beyond reserve margins — a result of resistance to changing how load forecasting is done.
“If you do what utilities have always done, the stakes for getting it wrong are pretty high,” Dyson told Utility Dive. “But we don’t have to do that anymore; the stakes don’t have to be so high. You don’t have to rely on multi-decade forecasts because you don’t need to build things with five-year-plus lead times.”