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How a changing workforce is reshaping energy demand

Rick Fisher's picture
Product Director, Financial Planning & Analysis PowerPlan, Inc.

An expert in electric utility regulatory, compliance, finance, and accounting processes, Rick leads the development strategy for PowerPlan's planning software solutions, including asset...

  • Member since 2018
  • 3 items added with 880 views
  • Dec 31, 2020

The COVID-19 pandemic has profoundly changed the way people live, work, and move about the world. As these behaviors continue to evolve, business leaders are discovering what the post-COVID workplace will look like. Beyond questions of health and safety, companies are building their workplace models based on which jobs can be performed remotely and which roles operate most effectively from an office.

The changing workforce is positioned to play a significant role in the future of electricity usage as the pandemic accelerates three key trends already underway: increased adoption of work-from-home (WFH), increased electricity demand shift from commercial to residential, and increased migration to the suburbs.

The pandemic’s disruption to commercial and residential electricity usage has been substantial.

Relative to February 2020, the second quarter’s residential electricity consumption increased by 10%, while commercial and industrial consumption decreased by 12% and 14%, respectively, the National Bureau of Economic Research reports.

With more Americans working from home, residential electricity consumption skyrocketed by nearly $6B from April to July, pushing up electricity bills by more than $20 per month.


New WFH economy

At this point, the pandemic has rendered the question of whether your company has a WFH policy relatively moot. Mandatory shutdowns and shelter-in-place orders left companies of all shapes and sizes scrambling to put them in place to keep operations running.

In June, Stanford University estimated that nearly 50% of the U.S. labor force was working from home full-time. Researchers predict more than one-third of those employees will permanently work from home in some capacity, leading businesses to rethink their office needs.

Columbia University’s Center on Global Energy Policy reports that between 2010 and 2017, the average square footage per employee decreased 30% from 225 to 150 square feet. Social distancing has prompted conversations around reversing that trend and increasing density.

According to the global commercial real estate services firm Cushman & Wakefield, companies are more likely to change office locations and how space is used rather than massively reducing square footage. Instead, office occupiers are considering expanding their footprints by taking more space or implementing a “hub and spoke” model of having a central hub and multiple smaller offices, typically in suburban areas.

Commercial real estate professionals already see an increase in traditional office and medical office users in single-story and low-rise buildings seeking to escape high-rises, where they must ride elevators and access public transportation, potentially exposing themselves and their employees to more significant health risks. Still, many companies are reluctant to abandon prominent office locations within city centers altogether. They are opting to implement a hybrid working policy that staggers the number of people in the office, which reduces the load on elevators and common areas and improves health and safety.


Flight to the suburbs

Economists and demographers are closely watching suburban migration patterns to assess the pandemic impact.

Although upticks in residents moving out of certain cities, such as New York, have been reported, the flight to the suburbs has more to do with broader demographic changes than COVID-19. The pandemic has accelerated some moves, primarily by Millennials who are ready to purchase homes and have children, that were preplanned.

Given that suburbs are less energy-efficient than dense urban areas, the energy demand of suburban life — from heating and cooling to yard maintenance to working from home — is typically higher than living and working in the city.

A significant suburban migration will majorly impact both energy demand and the environment. Studies are already reporting that increased suburban energy usage from WFH largely negates any net benefits gained from lack of commuting.


A shift in how we shop

The pandemic has also accelerated the shift in retail demand to e-commerce – by up to five years, IBM estimates. According to Columbia University, thousands of major stores have closed in recent years, and overall square footage for retail fell by 4.7% between 2010 and 2018.

As stores close, warehouses and distribution centers are expanding to accommodate e-commerce. Increases in warehousing will likely have minimal impact on energy load, if any, because warehouses consume five times less energy than retail

However, these trends will require a fresh look at resource planning and carbon models, particularly in states with carbon emission goals. Environmental ramifications, including net impacts on carbon emissions, EV adoption for delivery, and increased waste from packaging and returned goods, will need to be considered.


Short- and long-term Implications

While some experts estimate the decrease in electricity consumption will continue through 2021, others predict office and residential energy usage will offset one another or increase due to the expansion of office footprints combined with having both offices and homes using more energy. As suburban living becomes more attractive, experts will be tasked with devising ways to make the suburbs more sustainable.

A regulatory consideration driven by WFH is how peak and off-peak hours are defined. Since energy consumption on weekdays and weekends has become more similar, Monday through Friday electricity usage closely mirrors traditional weekend consumption, throwing off historical patterns and challenging utility operations. A permanent shift in WFH could motivate regulators to redefine peak and off-peak hours to reflect this shift.

Although it’s too soon to definitively predict how permanent these trends are or how they will alter overall electricity demand in the future, utilities must proactively analyze historical and real-time consumption data to identify and respond to trends as they emerge.

Now is the time to get nimbler and more creative. By evolving processes, models and technology along with their support ecosystems of consultants and vendors, leading utilities are making the strategic adjustments necessary to thrive in this new environment.

Matt Chester's picture
Matt Chester on Dec 31, 2020

It borders on becoming cliche at this point, but I think the utility sector is really at a pivot point. Technology has been forcing that, but the dramatic adjustments of 2020 have hammered it home as you greatly explain-- thanks for the overview!

Rick Fisher's picture
Rick Fisher on Jan 8, 2021

Agreed! While some new challenges presented themselves beyond table-top exercises (world-wide supply-chain challenges) a lot of these were simply accelerated as a result of 2020 Pandemic.

Henry Craver's picture
Henry Craver on Jan 7, 2021

I was optimistic that transportation electrification would bring on different behavior patterns that would ultimately decrease energy consumption: ride sharing, and perhaps more comprehensive public transportation. However, the urban flight you've detailed here makes that future seem more unlikely. 

Rick Fisher's picture
Rick Fisher on Jan 8, 2021

Thanks Henry - I agree that the urban flight makes realization of this more of a challenge.  In addition to that, I believe public health and safety with the pandemic also presented new challenges to public transportation as a whole on top of that.

Paul Korzeniowski's picture
Paul Korzeniowski on Jan 8, 2021

Interesting points. A big challenge has been trying to predict how the pandemic will reshape work, and the ripple effect of energy usage. It seems doubtful that companies will return to business as usual once the pandemic ebbs. Many are talking about more remote workers, but it will be interesting to see if employees push for a return to the office. In the past, few have opted to telecommute full time. Virtual can be convenient when one is in a pinch, but It seems like we humans feel the need to interact with one another face to face. 

Matt Chester's picture
Matt Chester on Jan 8, 2021

Here's another interesting angle of the topic that came into Energy Central-- I do think it's too early for us to yet have definitive answers, but this 'natural experiment' will surely be studied for years to come

Rick Fisher's picture
Thank Rick for the Post!
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