Morningstar | Can EVs, Pot, and Data Save U.S. Electricity Demand?
U.S. electricity demand has flatlined during the last decade, but we think it will spring to life. We forecast three emerging electricity demand sources—data centers, electric vehicle charging, and marijuana production—will approach 6% of total U.S. electricity demand by 2030, offsetting energy efficiency gains and resulting in 1.25% total annual electricity demand growth through 2030.We are reaffirming our fair value estimates and moat ratings for all U.S. utilities. Utilities will have to work hard to attract new demand. We think the most successful will be those that invest in grid expansion, smart networks, reliability, and renewable energy. Utilities that slack on investment could face slowing long-term earnings and dividend growth.
Three utilities that we think will benefit the most based on our electricity demand forecast are Dominion Energy, Duke Energy, and Edison International. All trade near or below our fair value estimates. Dominion and Duke should benefit directly from higher demand in their mid-Atlantic and Southeast locations. Edison should benefit from infrastructure investments to support California's progressive energy policies.
Data center expansion is the largest source of new electricity demand in our forecast. We expect data centers to represent more than 3% of all U.S. electricity use by 2030. We think the Southwest and mid-Atlantic regions will benefit the most from data center growth.
The second-largest source of new demand is electric vehicle charging, which we expect to accelerate in the outer years of our forecast based on Morningstar's bullish EV sales forecast. Third, expanding marijuana legalization and use could quadruple the industry's electricity needs as energy-intensive indoor growing facilities expand.
Energy efficiency will remain a drag on electricity demand, but we expect diminishing returns as high-efficiency lights, appliances, and building codes reach widespread adoption.
For more details on our U.S. electricity demand forecast, download our Utilities Observer report, "EVs, Pot, and Data: Can They Save Electricity Demand?" For more on our electric vehicle sales forecast, download our Electric Vehicle Observer published in September 2018.
Public Service Enterprise Group, through its subsidiaries, is engaged in the energy industry. The company conducts its business through two subsidiaries, Public Service Electric and Gas Company (PSE&G) and PSEG Power LLC (PSEG Power). PSE&G is a public utility, which is engaged in the transmission of electricity and distribution of electricity and natural gas in certain areas of New Jersey; and PSEG Power is a multi-regional energy supply company that integrates the operations of its merchant nuclear and fossil generating assets with its power marketing businesses and fuel supply functions through energy sales in energy markets primarily in the Northeast and Mid-Atlantic United States.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
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