Restructuring Economy

Energy Industry Megatrend #5: Economic Restructuring

In the last post in our energy megatrends series, we focus on economic restructuring in North America and how it points to – and changes – the way forward for utilities. (View Megatrend 1Megatrend 2Megatrend 3 and Megatrend 4.)

The Way It Was

After World War II, a housing construction boom began in the U.S., and this rising demand for homes powered much of the growth of the electric industry. Fueled by rising incomes and economic stability, homeownership grew steadily from 44 percent of households in 1940 to 65 percent by 1995. Following the housing bubble that dominated the early and mid-2000s, homeownership peaked at 69 percent. Construction followed; in 2005, annual single-family housing starts totaled 1,715,800.

The Way It Will Be

Then came the collapse of the housing market. After the bubble burst, the number of housing starts began its steep decline, dropping from just over 1.4 million in 2006 to 502,000 in 2012. The construction slump isn’t the only factor negatively impacting growth. Utilities also have to contend with dramatic shifts in power demand and consumption that will change the way they do business.

According to the U.S. Energy Information Association, a combination of factors – such as the recession, the decrease of the industrial sector and growing awareness and policy around energy efficiency – will significantly slow electricity demand growth to only 0.7 percent per year. Unlike other effects of the housing collapse and recession, these changes in demand growth appear permanent.

This means utilities will have to shift business models away from residential and commercial construction and away from weakening industrial sectors. Utilities all need to discover where the growth is happening in their specific markets; align with new partners to create new paths forward; see where they can innovate products, services and technology to support these new initiatives.

Talk to Southwire. As the largest manufacturer of wire and cable in North America, we can help you identify growth opportunities, activities and trends all over the country.

In The News: Georgia Power Shutdown Request Would Close Three Plants

– Carol Godfrey

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