Implications of COVID-19 for the Electricity Industry
The driving force of the economy is energy. The demand for electricity has been significantly reduced due to the recent Coronavirus outbreak.
Under these conditions, the energy market is seriously impacted and faced with huge challenges. Electricity demand has fallen sharply as governments around the world were compelled to reduce the business activity in response to minimize the threat of coronavirus, although the structure of the load and the regular load profile has also shifted. The share of renewable energy production has risen as a result of the fall in overall electricity generation.
Changes in the power balance situation and increased demand volatility have put higher pressure on system operators, as well as issues with voltage breach and system repair and management difficulties. The electricity sector is greatly impacted, though long-term investment in renewable energy is projected to be steady.
US Electricity Demand Analysis During COVID-19
In the United States, from March onwards, natural gas has remained the main source of electricity, though renewable electricity far outpaced the output of coal-fired power plants as the first measures of lockdown were in place and demand declined. Around June, as the rigor of government response softened, natural gas solidified its leading role.
Coal and nuclear energy peaked in July and August to equal the increasing demand. They surpassed the production of renewables, which declined in the face of the wind and hydro seasonal downturn. By August, the overall production of energy was much higher than in 2019, around the same time of the year, due to temperatures being higher. Therefore, this increase in demand was satisfied by increasing coal and higher wind generation.
The temperature significantly dropped in September, hence cooling demand and overall generation have decreased to lower levels than in 2019, affecting the output of coal power. In October, total generation levels were equal to 2019, and the electricity trend mix was seasonal. The fall in wind and solar production in December contributed to an overall drop in the share of renewables.
Compared to the same period in 2019, total energy demand in the United States dropped by 3.8% from January to August 2020. Commercial and industrial demand fell by 6.4% and 9.2%, sequentially, while residential demand grew by 2.4%. Both the coronavirus-related downturn in economic development and the comparatively mild winter heating season have caused the overall decrease.
Texas During Covid-19
Along with the out-of-control pandemic, the weather certainly impacts energy use. Texas, for instance, had such a hot summer, hence, regardless the fact that everyone was quarantined indoors, there was a rise in electricity usage caused by the air conditioners in August.
Furthermore, according to grid operator the Electricity Reliability Council of Texas (ERCOT), the Coronavirus outbreak, had a limited impact on the power grid in Texas. ERCOT delivers a critical service to Texans, and they took special precautions during these challenging times to ensure the health and welfare of their workers. For grid operators, extra cautionary measures have been taken, including alternating facilities and other practices that promoted social distancing.
In order to retain essential operations, ERCOT recognized personnel and suppliers that were expected on-site. Grid technicians, for instance, had to operate on-site. However, for employees and consultants who did not need to be on-site to fulfil their job duties, ERCOT introduced a voluntary work scheme from home.
Starting March 30, 2020, a new fund to support customers who needed assistance with their energy bills has been initiated by the Public Utility Commission of Texas. The Texas COVID-19 Electricity Relief Program (CERP) includes 2 options:
- Retail Electric Providers (REPs) shall give any residential consumer who demands one, independent of their prior payment history, a deferred payment package.
- For residential consumers who have been added to the state’s unemployed and low-income list due to the consequences of COVID-19, REPs must postpone energy disconnections.
On a different note, commercial energy use has seen a decline as schools, restaurants, movie theatres, businesses, day care centers and other non-essential facilities closed during the Coronavirus pandemic. In terms of industrial demand, it has not been predicted that will be affected, as staff continued to work from home. However, the shift in work patterns has made it difficult for grid operators to predict demand for every hour of the day. Grid operators have seen themselves analyzing trends that they have never seen before.
For the 12-month forward market price for energy in the ERCOT market, there has been little change. There are, however, a variety of variables that come into play when considering that:
- Demand: Commercial energy consumers have witnessed the oil price war between Russia and Saudi Arabia, in addition to the Coronavirus pandemic. A downturn in the economy could reduce electricity demand.
- Supply: Lower demand might indicate ample supply, suggesting lower long-term rates.
- Weather: Power use trends would look much like a residential load for Americans who worked and continue working from home. Since about 50% of residential use is related to heating and cooling, demand would be closely linked to the temperature and weather outside.
In the energy exchange markets, the transitions in consumption trends bring volatility. Volatility implies risk and higher costs are brought on by risk.
At Lone Star DR, our sole focus is to do irrefutably superior work for our Texas-based ERCOT Demand Response customers. Therefore, rest assured, even though the Coronavirus pandemic is a new form of emergency, being prepared to deal with an emergency is not.
Contact us for more information on how you can manage your energy and increase your budget during these challenging times, today.