Residential and Commercial demand, the step-children of natural gas fundamentals. After reading a recent Bloomberg article on the fastest growing cities in the US, BTU Analytics started wondering how population shifts really are affecting natural gas consumption in the residential sector. Is the migration to more southern and warmer states altering the way we consume gas?
According to the EIA, per-capita residential total energy consumption has been fairly flat since 1973 as shown below. This number includes all energy use, so efficiency gains in electronic devices and lighting could wash away any increased reliance on natural gas. Another important factor to consider when thinking about US energy consumption is the shift in population growth to the Southeast and Southwest. This trend increases reliance on energy for cooling demand which would show up in natural gas generation demand but lowers reliance on energy for heating demand directly impacting res/com deliveries.
According to the US Census Bureau, two of the top five fastest growing counties in the US from 2010 to 2014 were Maricopa County, Arizona (Phoenix) up 7%, and Miami-Dade County, Florida up 7%. Figure 2 shows Residential natural gas flows to these counties at citygates according to Genscape flow data. Miami-Dade and Maricopa counties have both shown flat demand since 2010 despite healthy population growth.
With Arizona and Florida having warm climates, we might expect to see growth in burn per degree in these regions as a result of population growth. Burn per degree charts show that while the general trend has been a shift to more natural gas fired generation, there is not a strong trend in year-over-year demand at a given temperature as shown by the charts that follow.
Like the majority of the market, BTU Analytics does not believe the residential & commercial sector will provide any real demand growth over the coming years, as Maricopa and Miami-Dade counties demonstrate. Of the top 10 fastest growing counties, four are in Texas, three are in California and there is one each in Arizona, Florida and Washington. If res/com gas demand is truly only driven by areas with natural gas heating, don’t look to the majority of these fast growing counties to juice natural gas demand. The power sector however is expected to see decent increases of gas burn, partially due to load growth as a result of population gains. Most forecasters peg electricity load growth at a 1%-2% annually and BTU Analytics expects natural gas consumption by the power sector to increase by almost 20% between 2014 and 2020.
As BTU Analytics has highlighted recently, developments in wind generation throughout the Midwest has taken a bite out of natural gas demand growth. Additionally, according to DSIRE, the US currently has 2,769 State incentives for Renewables and Energy Efficiency developments or updates. Throw in the possibility of affordable solar backed battery storage, thanks to Mr. Elon Musk at Tesla, and we may continue to see flat demand growth in some regions despite an influx of people.