Countervailing Forces at Work
Robert Wilhite is Senior Managing Director Black & Veatch Management Consulting, LLC. He is an energy industry leader with thirty-five years’ experience in business strategy, operations, energy efficiency, consulting practice development, executive leadership, and industry visioning.
Jim Hendrickson is Senior Managing Director Black & Veatch Management Consulting, LLC. He assists energy and utility organizations on corporate and competitive market strategies and transformational at both the enterprise and business unit levels.
The signpost is clear. Residential electric consumption has become the most affordable in recent American history. As reported by Public Utilities Fortnightly in a March 2020 communication, "residential electric bills of Americans were just 1.22 percent of all personal consumption expenditures this January. Since the U.S. Department of Commerce started reporting personal consumption expenditures in detail, sixty-one years ago, that percentage has never been lower." It's worth noting that since 2017, this metric has fallen below a historical floor of 1.3 percent approximately one-third of the time.
While the affordability metric is clear, uncertainty exists regarding the future direction of this trend. A key question for further exploration is, how sustainable is the downward trend in electric pricing? This is especially uncertain given the transformative forces across the industry that aim to increase electric energy use, along with countervailing drivers that are simultaneously seeking to curtail electric consumption.
For example, increasing decarbonization policies at the state and local levels are introducing cleaner, fossil-free forms of energy supply across multiple sectors, such as power production, transportation, and buildings. These policies are expected to increase electric energy consumption, especially where cleaner fuels (hydro) are available for power generation.