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Annual Energy Outlook 2021

Release Date: February 3, 2021  |  Next Release Date: January 2022  |  AEO Narrative

Electricity demand grows at a modest rate throughout the projection period

Electricity use growth rate, three-year rolling average

Figure data

Annual average electricity growth rate is less than 1% from 2020 to 2050 in the Reference case

In the short term, demand for electricity may fluctuate as a result of year-to-year weather changes, but EIA projects that longer-term trends in electricity demand are driven by economic growth, and are somewhat offset by efficiency improvements. In the AEO2021 Reference case, after electricity demand returns to 2019 levels (following the impacts of COVID-19) in 2022, the average annual growth rate surpasses 1% only toward the end of the projection period. EIA projects electricity demand in the AEO2021 High Economic Growth case to grow at about one-quarter of a percentage point faster than in the Reference case, and it projects electricitiy demand in the Low Economic Growth case to grow at about one-quarter of a percentage point slower than in the Reference case.

COVID-19’s projected impacts on electricity demand are short term in the Reference case

Although shifting weather patterns and efficiency improvements explain some of the near-term changes in electricity demand, the COVID-19 pandemic and associated economic downturn has a role as well, resulting in a near-term decline in electricity demand. EIA does not project long-term structural changes in electricity demand resulting from the pandemic, and the AEO2021 Reference case projects that demand largely returns to 2019 levels by 2025. Before 2025, higher residential sector demand partially offsets lower electricity demand from the commercial and industrial sectors.

The share of onsite electricity generation increases across non-transportation sectors

Electricity use growth rate, three-year rolling average

Figure data

The growth in electricity sales from vendors is lessened by significant growth in onsite generation in the residential, commercial, and industrial sectors. Installation of rooftop photovoltaic (PV) systems, primarily on residential and commercial buildings, and combined-heat-and-power systems in industrial and some commercial applications, will account for more than 7% of total electricity generation by 2050, almost doubling the 2020 share of onsite power generators.

Electricity demand in transportation remains low

Although the greatest potential for increased electricity demand is within the transportation sector, electricity demand from this sector remains less than 3% of economy-wide electricity demand throughout the projection period. Current laws and regulations are not projected to induce much market growth, despite continuing improvements in electric vehicles (EVs) through evolutionary market developments. Both vehicle sales and utilization (miles driven) would need to increase substantially for EVs to raise electric power demand growth rates by more than a fraction of a percentage point per year.

EIA does not project long-term structural changes in electricity demand resulting from the pandemic, and the AEO2021 Reference case projects that demand largely returns to 2019 levels by 2025..