5.2 elasticity of demand for electricity
The relationship between GDP and energy can be measured by its elasticity, or in other words, the relationship between an increase in GDP and the additional consumption of electricity necessary to produce it. The more efficient the use of energy, the lower the amount necessary to produce the same unit of GDP. According to the PDE 2012-2021 , income elasticity projected for the coming decade is estimated to be 1.04 for electricity and 1.01 for energy, or in other words, for each percentage point of growth in GDP, the demand for electricity will rise 1.04%.
The demand for electricity was calculated based on growth estimates for GDP (Table 5.2) and elasticity.
Whereas elasticity (Table 5.2) was estimated based on data from Itaú/BBA, with numbers calculated by the government in the PDE 2012-2021 and extrapolated out to 2050.
According to Table 5.2, the trend projected for elasticity for 2050 points to rates of between 0.7 and 0.8, already observed in some countries that have adopted efficiency measures for production processes, changed their industrial profile and reduced consumption in other sectors. And there are also extreme examples, in Asian countries, such as Japan, and the United States, as with California, where GDP grew for a number of years without an increase being observed in the consumption of electricity.This shows that growth in economic activity and population does not necessarily result in proportional growth in demand for electrical energy. For Brazil, it is projected that the maturing of demand for electrical energy in the country, the increase in efficiency of production processes and the transition of the national economic profile will stabilize the elasticity in the last decade of the analysis at a value of between 0.7 and 0.8, approximating that of developed economies. In the scenario outlined, we suppose that, for the period 2010 to 2020, the growth in elasticity will follow GDP at a proportion of 1.1 for residential and commercial sectors and 0.85 for industry.
In the 2030s, electricity will closely follow GDP, accompanying this growth by 97% for the residential and commercial sectors and by 78% for industry.The proportional consumption of electricity will be lower, with an elasticity of between 0.78 and 0.83 for the 2030s, consolidating the growth of the national economic sectors toward that found in developed economies.
Figure 5.1 shows how demand and final consumption of final energy will develop in Brazil in the reference and Energy [R]evolution scenarios, combined with estimates for population growth, GDP and energy intensity.
In the reference scenario, the final demand for energy rises by 108%, from 8,173 PJ/year to 17,040 PJ/year in 2050. In the Energy [R]evolution scenario, the final demand for energy rises by 54% in comparison to current consumption and reaches around 12,600 PJ/year in 2050.
The energy demand for the industrial sector should grow in both scenarios. Since the rates of economic growth and elasticity are equal for both, the variation in growth of total energy demand is different due to the increase in energy efficiency in the Energy [R]evolution. In 2050, the Energy [R]evolution will require 25% less energy than the reference scenario.This reduction is also seen in transportation (reduction of 29%) and industry (reduction of 22%).
In the Energy [R]evolution scenario, the demand for electricity will rise in all sectors: industrial, residential, service and transportation (see Figure 5.2). The total demand for electricity will rise from 438 TWh/year in 2010 to 1,023 TWh/year in 2050. In comparison with the reference scenario, efficiency measures in industry, residences and the service sector will reduce the need for generation by 205 TWh. This reduction can be achieved through an ensemble of initiatives, such as the use of efficient equipment in every sector, rationalizing the use of energy, substituting electric water heaters with solar water heating and also by introducing highly efficient electronic mechanisms, using the best technology available.