Demand for electricity has been anemic of late, but it has historically increased at a slow but steady pace. Population growth and economic growth have been the main drivers. However, energy conservation could play havoc with the "normal" trends. That, in turn, would be bad news for utilities like Duke Energy (DUK -0.39%).

The government's projections
The U.S. Energy Information Administration (EIA) creates long-term forecasts for energy use in this country. Its "reference case" for electricity out to 2040 assumes that power generation is set to increase almost 30%, about 1% a year, to sate slowly increasing demand. That's basically what's happened for decades.

The only problem with this projection is that electricity demand fell four out of the five years between 2008 and 2012. While the 2007 to 2009 recession clearly had a lot to do with that, it doesn't explain everything. Conservation is having an increasing impact, from the use of new, low-power lighting (florescent bulbs and LEDs) to consumer and industrial equipment that sips the juice instead of guzzling it.

Source: EIA

If this trend continues, power generation is projected to increase just 7% out to 2040. When looked at over a 25-year time horizon, that works out to be virtually no growth at all... at least for most power sources. Renewable power's piece of the pie grows nearly 60% in this "worst case" scenario. That's actually a better outcome for renewables than the "reference case," where it's share only grows about half as much.

Making money?
The worst case, or the "low demand" scenario as the EIA calls it, could be a problem for traditional utilities. For example, Duke Energy is expecting investments in its regulated fleet to provide four percentage points of its 4% to 6% growth projection over the next two years. All of Duke's other pluses and minuses, like increased tax rates, higher interest rates, and demand growth, basically cancel each other out.

Since generation growth spending of $3.4 billion represents the core of Duke's near-term growth forecast, what happens if the EIA's "low demand" case plays out? Nothing over the next few years, as that growth is pretty much baked in the cake. However, Duke could find top- and bottom-line growth harder to achieve over the coming decades without increasing demand driving increased spending on base-load power.

An industrywide issue
This isn't just a Duke Energy problem. It will be harder to convince regulators across the country that rates need to increase if demand isn't enough to justify new construction. That is, unless you are building renewable power plants, like solar, wind, and hydroelectric. That's where a utility like NextEra Energy (NEE -1.08%) may be ahead of its time.

The company owns Florida Power & Light, but it also runs a merchant power business focused around renewables. NextEra's Energy Resources division has built over 12,000 megawatts of renewable power over the last decade and has another, "11,000 MW of stable long-term contracted projects" lined up. It lays claim to owning the, "Largest wind and solar renewable portfolio in North America."

Wind power makes up over 70% of NextEra Energy Resource's generation profile, with solar accounting for a less impressive 4%. It generates almost twice as much power from wind as the next largest competitor. The wind portfolio has grown at an average annualized rate of 17% over the past decade. Wind is a small slice, about 4%, of the U.S. electric picture today, so there's at least the potential for this type of growth to continue for years to come.

Source: EIA

With government mandates pushing renewable power, NextEra's merchant power business would be a huge asset in the EIA's "low demand" scenario. Others might follow NextEra's lead and start spending on renewable power projects, of course. With a big head start, though, many competitors might be just as inclined to hire NextEra to meet their own renewable quotas.

A fast-changing picture
If you own a utility, you'll need to keep a close eye on the energy landscape. Demand will be an increasingly important indicator of performance. Utilities like Duke and NextEra really don't have much to worry about over the next few years. However, NextEra's aggressive investments in renewables could prove prescient over the longer term.