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Supply vs. Demand...We are Heading Towards a Cliff
By Mike Hyland
Executive Director, NEPPA
There’s plenty of sayings that have rung true throughout time. In real estate - its “location, location, location.” Simple to understand and still as true today as it was 100 years ago. The location of the property is paramount when appraisers attempt to list an accurate price for selling. On the oceanfront, lake or pond? - cha-ching – that adds to the sales value. In a bad school district with no community programs - you can buy it below market rate. Simple - yet true.
“It’s the economy, stupid!” Every four years we see incumbents and challengers vie for their election into power. People will list off the items of why the election might go one way or another and discuss how incumbents tend to win a majority of the time. But then one pundit said, ‘it’s about the economy, stupid’.
Bam - conversation changed. In 1992, James Carville, chief strategist for the Clinton campaign coined that slogan to help unseat George Bush. If the state of the economy is good and getting better- incumbent usually wins. If there’s a recession during the election season and citizens 401K ‘s are down, the incumbent might be looking for a new job, as did President Bush.
“It ain’t over ‘til the fat lady sings” Although originally based on the Wagner Opera Der Ring des Nibellungen, where the buxon Valkyrie Brunnhilde is the Norse shieldmaiden on stage for the final 20 minutes of the play and thus the colloquialism “It ain’t over ‘til the fat lady sings” was coined. Over the years – this proverb has been directed towards sports in particular, as no one truly knows the outcome of any game or match until the end. Although used for over 150 years, I’ve heard it recently when an announcer discusses a World Series or Superbowl comeback. How about in 2017 when the Patriots and Brady orchestrated the largest comeback in Superbowl history by beating the Falcons in overtime to erase a 28-3 deficit? An opportune time to use this memorable line.
So, what is our mantra in the utility industry?
I started my career in the electric industry in 1983. In those 41 years, one proverb that has been preached to me as gospel, has been the push for energy conservation, demand response, and energy efficiency (especially with the policy makers). The main saying of the energy community has to do with using less energy, controlling the end use energy we do use, and making the energy use more efficient. With this comes improvements in lighting, water heater wraps, whole house insulation and appliance efficiency upgrades (due to the 1975 DOE Energy Policy and Conservation Act). These things have been quite effective in lowering the demand, when compared to productivity. A kW and kWH today go a lot further than they did in 1975. Kudos to our industry and all the players that have made this happen. As a country, we never really rallied around just one saying, but any of the following would have worked in my opinion:
“Conserve energy for a better tomorrow”
“Save energy, save money, save the world”
“Think before you act, save energy”
“Power saved is power earned”
“Conserve energy, save money”
But if we were going to look at the current situation in the electric industry - are the tides turning? Maybe…. We need a new slogan.
The latest push to electrify everything is causing an imbalance in the utility world. Electrifying everything is making generation the new king. At each and every turn, there’s an attack on the dispatchable generation along with directives to electrify cooking, heating, driving, and well – you get it – everything! You do not need to be a math major or STEM wonk to understand that more electric load requires more electric generation. Any additional generation must be dispatchable and ready to generate in minutes. A brutally cold winter night in the northeast, without the sun shining or wind blowing, could be our worst nightmare. Nuclear, hydro, and fossil fuels, such as natural gas and oil, keep our grid up and running. It’s just the facts. We can’t ignore them. Batteries might buy us a few hours – but not enough to carry the grid through a week-long cold snap.
Immediate supply and demand is a simple concept that bleeds into every area of business. At NEPPA for example, more students in our classes means more instructors are needed and we need to order more sandwiches to fill their bellies at lunch time. Imagine our business model if instructors showed up only when the sun was out, or the wind was blowing? Imagine our lunchtime chaos if only 50 – 75 percent of the sandwiches were available (something I don’t want to imagine)? I can see myself now… walking into the Apprentice Class and choosing who eats and who doesn’t. Much like businesses choosing which line to run and which one to turn off, or maybe which ski lift to run and which lift to turn off. Crazy to think of this, but that’s where we are headed as an electric industry - more demand, less dispatching generation. When businesses turn off production lines, or close due to lack of power – that is called demand destruction – not energy conservation.
The answer? It’s simple. We need more generation and lots of it. But… please don’t think this is a “Mike Hyland” idea. Read the real experts, such as NRECA’s CEO, Jim Matheson, who last week pointed out three recent front-page articles.
1. The March 14th New York Times article, A New Surge in Power Is Threatening U.S. Climate Goals.
2. The Washington Post on March 7th ran the story, Amid Explosive Demand, America is Running out of Power.
3. On March 12th, Reuters posted the article, US Power use to reach record highs in 2024 and 2025- EIA.
Articles about the supply crisis are popping up more frequently, and in more abundant newspaper outlets. The concerns are real, the arguments are valid. If we grow our demand by 50% - 100% through electrification, we need the generation to go with it. Maybe our saying should be: “It’s the generation, stupid!” Or how about “Supply, Supply, Supply”. In the game of electric utilities, my worry is that although the Norse shieldmaiden might not be singing just yet – she is warming up.
Cheers
-Mike
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