Electricity use used to be a primary gauge of economic growth. And people are using more gadgets, TVs, and air conditioners than ever before.
But electricity usage is amazingly flat. This could mean trouble for electric utilities, a defensive investment strategy commonly used by investors who are risk averse.
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For decades during the 20th century, electricity consumption reliably grew by about 8% per year. That’s why electric utilities were considered a defensive investment—people would always need it and it had a reliable growth rate.
But the demise in US manufacturing has caused a drop in industrial electricity use, which accounts for about a quarter of all use.
Some power companies are scrambling to cut costs and redirect investment to improve profit margins regardless of consumption patterns.
Others are investing in high-voltage transmission lines and charging a premium based on the government’s encouragement for private investment in the nation’s aging power networks.
Electric utility companies are known for paying dividends
but some companies are already looking to trim their payouts to investors.
The growing popularity of wind and solar power also may play a significant part in how power is sourced in the future.