What Does Future Energy Demand Growth Look Like?

As the country moves toward more energy dependent innovations such as electric vehicles and artificial intelligence, the US must strategically plan ways in which it can provide an adequate amount of electricity to meet the demand. While there are several different methods to addressing this problem, each comes with pros and cons. Let’s take a look at some historical data regarding energy demand growth as well as forecasted future trends, in order to better understand where we are headed.

Historical Energy Demand Growth

The historical average energy demand growth in the US is around 1.8%. Typically, the largest driver of energy demand growth has been economic growth and industrial expansion. For example, after World War II the US saw massive economic growth and development leading to an annual energy demand growth rate of 4-5%. Many economists believe that the US will see similar growth in the coming years due to the adoption of innovations such as electric vehicles and artificial intelligence.

Future Energy Demand Growth

Looking to the future, energy demand growth is expected to grow rapidly as the adoption of new innovations such as EV’s and artificial intelligence will require large amounts of electricity to operate. The current EV growth curve indicates that approximately 29.5% of all new car sales will be electric vehicles by 2030, with states such as CA pushing for full adoption by 2035. On top of this, the market for artificial intelligence is projected to grow 28% annually from now until 2030. With such ambitious goals and steep projections, it is important that we have the necessary infrastructure to support the likely increase in energy demand.

Necessary Infrastructure Changes

In order to ensure efficient and reliable energy as demand grows, the US must improve its energy infrastructure. The current grid is outdated, making it vulnerable to blackouts if demand is too high. The largest problem with the current grid is the transmission lines that distribute energy from power plants to substations, who then send the power to consumers. As the US continues to increase its reliability on renewable sourced energy from remote locations, improvements to these transmission lines are necessary to transfer the energy. Some other potential infrastructure changes are increased automation such as the implementation of SMART grids and upgraded transformers with increased capabilities. SMART grids are networks that automate the processes of monitoring and managing the flow of electricity throughout the grid. This technology can optimize the transmission of energy, provide stability to the grid, and respond quickly to power disturbances. On top of this, upgrading transformers are another way we can upgrade the grid infrastructure to improve safety and efficiency. Many older transformers are prone to sudden breakdowns, subpar efficiency, and increased emissions compared to new Tier 2 transformers.

What is FERC

FERC is the Federal Energy Regulatory Commission who regulates the interstate transmission of electricity, natural gas, and oil. The agency is largely in charge of infrastructure changes to the grid and therefore has a vested interest in optimizing grid infrastructure to support the addition of renewable energy sources. Over the years, FERC has signed many orders attempting to assist the transition towards efficient energy transfer and sourcing.

FERC Order 888

The Federal Energy Regulatory Commission has been attempting to optimize the US energy grid for years. Starting in 1996, FERC signed Order 888 as a means to oversee utilities companies and fight against monopolistic practices. The overall goal of Order 888 was to provide equal access to the grid for consumers and private utility companies in competition with the public utilities. The order ultimately failed as public utility companies continued to partner with each other and dominate the market.

FERC Order 1000

In July of 2011, FERC passed Order 1000. The goal of this order was to increase regional transmission development by eliminating monopolies within the transmission industry. In order to accomplish this, the commission required regional planning outside of the organized RTO’s (regional transmission operators). This was meant to allow for new private and non-investor-owned utility companies to enter the market under an established participation model for revenue based off rates, similar to the public utility companies. This was meant to spur more regional development and push the grid towards more widespread support for wind and solar projects. Unfortunately, Order 1000 is widely regarded as a failure as to date there has still never been a regional project (project with costs and benefits shared among multiple utilities) outside of the pre-established RTO’s. The main loophole in this order was that utilities could build transmission lines within their local footprints without competition as long as they paid for it themselves (through investors) or through its ratepayers.

FERC Order 1920

In May of 2024, FERC passed Order 1920. The goal of this order is to push utilities and RTO’s to plan for long term changes in the supply mix as energy transition towards renewables continues and demand for power grows. A large driver of this order is the interconnection queue backlog as current infrastructure is currently not capable of deploying around 2.6 terawatts of power. The order mandates that transmission operators perform and revise long-term transmission planning over a 20-year period in order to anticipate future demand and become more adaptable to future changes. On top of this the order implements increased emphasis around “right sizing” of projects. Order 1920 defines “right sizing” as “the process of modifying and in-kind replacement of an existing transmission facility to increase the facilities transfer capability.” This measure is meant to ensure future transmission projects are optimally built and therefore not under or oversized.

Overall, the future energy demand growth is likely to substantially increase as the country continues to adopt energy intensive innovations such as electric vehicles and artificial intelligence. While FERC has long attempted to optimize the electrical grid, its efforts have often fallen short. With the recent passage of Order 1920, it is important that FERC and individual utility companies place increased importance on maintaining the reliability of the grid system and delivery of low-cost power to consumers. In order to achieve these goals, regional transmission operators must plan with increased emphasis on energy demand projections, the best sources of new energy generation capacity, and technological innovation forecasts. Overall Order 1920 seems to be a push in the right direction to modify the grid, making it more suitable for future energy demand growth.