The energy transition is being held up by the slow rate of growth in electricity demand. Two examples illustrated this problem today (December 19th 2024).

· Aurora, the Oxford energy consultancy, said that periods of negative price in the UK multiplied six fold between 2022 and 2024. Aurora points out that this causes concern among investors about the future profitability of new renewable electricity projects, and therefore slows the growth in renewables.

· Better Energy, a large solar developer in Denmark, went into restructuring, a route that seems roughly equivalent to the Chapter 11 process in the US. In its press release Better Energy wrote ‘The green energy transition is in crisis, as the shift from fossil fuels to electrification is progressing too slowly. This creates uncertainty about the pace of the transition, makes investors uncertain and thus changes investment conditions’. ‘It became increasingly clear that the roll-out of green electricity production risks out-running the market’.

This short note estimates the increased electricity use arising in the UK from the installation of heat pumps and the purchase of electric vehicles and compares these numbers to the overall change in electricity demand.

First, what is happening to electricity demand across the UK? Government statistics show that between 2010 and 2023, total power demand fell by 18% or 68 terawatt hours (TWh).. Deindustrialisation and greater efficiency in home appliances and lighting are principal causes. For example, domestic demand peaked at 125 TWh in 2005, falling to about 92 TWh in 2023.

The decline in total electricity consumption appears to be continuing with a decrease of 1.1% or 3.5 TWh between 2022 and 2023. Growth in data centres and AI servers may diminish the rate of decline but the UK’s high electricity prices do not make the country a logical location for applications that require large amounts of power.

As a second question, how does this yearly fall compare to the increased use of electricity from the growth of electric cars and heat pumps, the two principal changes currently tending to push up requirements for electricity?

Electric vehicles

This year will see sales of about 360,000 pure EVs in the UK. British cars do about 15,000 km a year, or just under 10,000 miles. Typically, an EV will use about 1 kWh per 6 km travelled. So each new car sold adds about 2,500 kWh, or 2.5 MWh, to yearly electricity consumption.

360,000 new EVs (and assuming no retirements from the fleet) will therefore add 0.90 TWh to UK electricity need.

In addition about 170,000 plug-in hybrids will be sold. If we assume that half their travel is powered by electricity, this will add about 0.21 TWh to UK demand.

Some other electric vehicles, including buses and light vans, are not included in these figures. At a guess, this might add a further 0.20 TWh to electricity need.

Heat pumps

Heat pumps are growing rapidly in the UK and installations will probably reach about 50,000 in 2024. (Of course this number is very small to the installation rates in almost all other European countries). I estimate that each new heat pump will add 5,000 kWh to demand every year, meaning an increment to national electricity needs of about 0.25 TWh from these new heating systems.

The balance

New purchases of heat pumps and EVs will add just over 1.5 TWh to total electricity demand in the UK in 2024. This is substantially less than half the decline of 3.5 TWh in total power use between 2022 and 2023. And even this comparison is flattering because 2023 sales of EVs and heat pumps will have helped push up demand for electricity in that year.

Very roughly, installation rates of new electricity consuming equipment will have to triple to outweigh the underlying fall in power use. As Better Energy said this morning ‘The main challenge is no longer the production of more renewable energy, but increasingly declining demand’. In an unavoidable conclusion, better energy efficiency is the enemy of the energy transition.