A Look at the Data
The US Energy Information Administration (EIA) compiled the five-year averages of electricity use and economic activity for seven countries: the United States, the United Kingdom, Japan, China, India, Egypt, and Brazil. The data found the United States, United Kingdom, and Japan all experienced a decoupling of electricity use rates and economic activity between 2011 and 2015. These economies are shifting from being manufacturing-based to being service-based. This affects not only their economic activity but their demand for electricity.
On the other hand, electricity use and economic activity in China, India, Egypt, and Brazil continue to be strongly connected. In China during this time, economic activity slightly outpaced electricity use, while the opposite was true in India, Egypt, and Brazil.
What’s Causing the Shift?
The transition from manufacturing to service-based economies is a major contributor to the decoupling of electricity use and economic activity in the United States, United Kingdom, and Japan. The service and commercial industries use less energy of all types than the industrial and manufacturing industries. As the service and commercial industries contribute an increasing portion of a country’s total economic activity, electricity usage decreases.
On the other hand, manufacturing and industry in China, India, Egypt, and Brazil continue to use technologies that are less efficient than those in the United States, United Kingdom, and Japan. Their workforces are also lower-skilled. Both these factors contribute to high electricity use.
What Does the Future Hold for the Electricity Use-Economic Activity Link?
Globally, the EIA’s International Energy Outlook from 2017 predicts that electricity use growth will remain lower than the rate of economic activity across the globe as technologies continue to become more efficient. The gap may continue to grow if fast-growing economies such as China and India shift from manufacturing to service.
What does all of this mean for your business? If you use electricity usage as an indicator for how well your business is doing, it may not be as relevant a factor now as it was in the past (the same goes for your domestic and international competitors). As usage decreases, utility companies may feel the need to raise rates to stay in the black.
SM Engineering stays on top of industry knowledge so you don’t have to. Schedule your no-obligation, free utility bill audit today to discover if you’re paying too much for utilities.
