Predicting Electricity’s Future

Have you ever thought about how your use of electricity varies throughout the day? Coffee pot for breakfast at home; lights, computers, machines at work; scoreboard at a basketball game tonight; outdoor and indoor lights when you return home for the evening—the demand for electricity is not constant.

From one day to another, though, the demand in a particular town or section of a county is similar enough to make it fairly easy to estimate how much electricity will be needed next week. Using previous years as a guide, it’s not too difficult to predict demand one year ahead. But predicting how much electricity will be required farther into the future gets a lot more complicated.

For Big Rivers Electric Corporation, which generates and transmits electricity to three distribution co-ops in western Kentucky, predicting future needs involves many factors.

President and CEO Mike Core says, “The first five or six years of a forecast of electricity demands are the most reliable. But as we look beyond that, it gets much more difficult because demand moves on a variety of factors. The first thing we have to consider is weather patterns. Will the future have normal or average weather for that season, or extremely cold weather, or extremely hot weather?

“Second, we look at local economies. Will there be growth in the business sector? Will old factories close or new businesses open? Third, we have to look at what kinds of electrical devices people will have in their homes. Will people replace old appliances with more energy-efficient models? Fourth, we look at housing patterns. What are the building trends in our area? Will there be more apartments or condos or single-family homes?”

Ron Crouch, director of the Kentucky State Data Center at the University of Louisville, notes that trends in Kentucky differ from national averages.

“Nationally, people are more clustered in urban areas. The latest U.S. census data showed that 79 percent of the American population lives on 2 percent of the land,” Crouch says. “But here in Kentucky, we are much more rural. Within our state, just 56 percent of our population lives on 3 percent of the land area. In the 1990s, Kentucky’s population grew by about 10 percent, but we predict that growth in the future will increase at a more moderate rate.”

New data-gathering patterns currently being phased in mean that instead of having to wait every 10 years for precise census figures, a new program, the American Community Survey, will provide updated census information for many areas each year.

Improving the timeliness and accuracy of population statistics is vital. Roy Palk, CEO of East Kentucky Power Cooperative, which generates and transmits electricity to 16 distribution co-ops, says, “Every two years we prepare a load forecast with information supplied to us by our member co-ops. We consider as many econometric details as possible—jobs, housing starts, household incomes—to make sure that the demand for electricity is not over-projected.”

Palk continues, “We actually make a three-part forecast for the future. We predict electricity demand according to what we think our base load will be, what the intermediate load will be, and what the peaking load will be. Then we compare each of those numbers to what our projected capacity will be, that is, how much electricity we can generate ourselves. We also have to predict what may be available if we need to buy additional electricity on the open market during peak loads.”

Such attention to detail is necessary because any increase in the power supply takes a long time to become reality. Plans for a new generating facility must be submitted to the state Public Service Commission for approval, environmental considerations accommodated, then construction bids must be asked for and evaluated, and financing arranged, all before building can begin.

Palk says, “Right now, in 2005, we are already looking at what kind of power supply we will need in 2008 and 2009.” Palk notes that East Kentucky’s system is growing at twice the rate of the national average. And in 2008, Warren Rural Electric Co-op, based in Bowling Green, will move off the TVA system and begin getting its electricity from East Kentucky.

Predicting demand for electricity is also influenced by the supply and price of other forms of energy. Energy price fluctuations in the 1970s taught the utility industry to look at many more angles, such as the cost of natural gas, coal, and even gasoline, when figuring how much electricity people will want to use.

According to Mike Core, drawing graphs and charts is just part of the process. A deeper understanding of the entire utility industry based on years of experience is vital. Core says, “Predicting the future of electricity and load forecasting is not a science—it’s an art.”

To find out more about population trends and take a look at the future, visit the Kentucky State Data Center’s Web site at http://ksdc.louisville.edu/.