Sunday, November 13, 2011

Fun with energy generation statistics

The prior post made me want to verify trends in energy generation and prices, so I took a a glance at the resources available over at the Energy Information Administration. Two interesting pieces of data they have available are average consumer electricity costs and total installed capacity by source. I graphed these trends for 1990-2009 (the range data was available for).

Two trends are apparent - first, nearly all the new capacity installed in the last decade has been natural gas. Likewise, one notices a precipitous rise in electricity costs nearly around the same time (e.g., around 2003). Obviously, this would seem to indicate two things - first, supply and demand is alive and well in energy production markets (i.e., utilities have rushed to capture rising energy prices by quickly installing natural gas capacity, which can be rolled out relatively fast and with low up-front cost). Second, claims of "cheap natural gas" have yet to reflect themselves in retail electricity prices. Perhaps this trend will only bear out in more recent years (2009-2011), however the idea that electricity prices will dramatically lower seems to strain belief, particularly given global trends. In this sense, the business case for nuclear seems it will only become easier to make, cheap natural gas or no.

A second piece of data is an overall analysis of historical electricity prices, courtesy of the Edison Electric Institute (thanks to Alan for locating this for me). This data, going back to 1930, analyzes retail electric prices normalized to the consumer price index (CPI), a common measure of inflation; the historical numbers in this case were normalized to 2005 prices.

Notice what happens with electricity prices in real dollars - they slowly declined until around 1970 (i.e., the oil crisis), where they continued to climb, although more slowly in the 80's (even declining slightly in the 90's). One problem with this data of course is that it stops around 2005 - right around when electricity prices began to rise precipitously once more.

Finally, let's look at the last piece of the puzzle, which ultimately has determined decisions on whether to expand capacity: electricity demand. I plotted out EIA data for residential electricity sales versus electric price:

Demand is relatively flat from 1990-1992 and begins to take off afterwards (i.e., corresponding to economic growth) and then plateaus again around 2004 (recession). Unfortunately, data was not available prior to 1990, but a similar trend in flat-lining demand is what occurred during the 1980's, which is ultimately (in addition to the changing regulatory environment) which brought nuclear expansion (along with most other electric capacity expansion) to a grinding halt. As demand began to pick back up during the 1990's, the gap was filled almost entirely by new natural gas (and, incidentally, electricity prices came along for the ride.)