How has Covid-19 Changed Electricity Demand in the United States?
- Nov 26, 2020 4:26 pm GMT
At the beginning of this year, the Energy and Information Administration (EIA) predicted a growth of approximately 1% for electricity demand in its annual energy report between 2019 and 2030. Regional ISOs also had similar numbers in their projections for electricity demand. Then Covid-19 happened.
The world turned topsy-turvy and previous electricity demand forecasts were thrown out of the window. In April, the EIA reversed its earlier forecast and predicted a 3.2% drop in electricity demand. By July, based on actual data from the field, that figure had dropped to 2.4%. In its latest November report, the agency predicted a 3.6% drop in electricity consumption.
Those changing figures for electricity demand forecasts have hardly affected utility operations. Even as other companies in other sectors crumbled under the weight of falling revenues, the performance and delivery of electric utilities remained fairly steady. The whipsawing numbers for demand are also expected to resume normal course when economic growth resumes. But the sector has not emerged unscathed from the pandemic. Changes in demands may have effected long-lasting changes their load management and revenues.
Less Baseload and More Residential Demand
The key question from the pandemic for electric utilities is not the extent of changes but whether they will have a lasting impact on demand for their product. Unlike other commodities, electricity consumption is no longer subject to rapid and significant changes in supply and demand. After bursts of growth in the last century, changes have been relatively gradual. From 1960 to 1973, electricity consumption grew at an average rate of 7.4%. It went down to 1.7% between 1998 to 2010. In the last decade, it has remained more or less stagnant.
While the pandemic will not reverse this situation, there has been a well-documented change in demand patterns. Residential demand shot up as a result of lockdowns. Commercial & Industrial (C&I) demand plummeted due to shuttering of businesses. This state of affairs is not permanent; but it has implications for utility load management.
An October research paper at Columbia University’s Energy Policy center predicts “dampened” load patterns for the future. The study found that changes in residential demand and shifts in commercial usage could reduce net load by 65.25 terawatt hours to 158.8 terawatt hours or approximately 1.6% to 4% of overall US load in 2018. Residential load might witness a slight uptick in numbers, according to study, but it will not be enough to make up for the resulting shortfall. Economists and analysts have predicted that the economy will gather full steam by 2022.
Whether this resumption translates to business-as-usual for the C&I sector is still an open question, however. “The allocation of load among commercial users may change significantly as the retail sector shrinks, balanced by an increase in warehouse and logistics space dedicated to e-tailers,” the study’s authors write, adding that new retail spaces may be less electricity intensive. Energy efficiency measures are expected to have an impact on industrial load once the economy is back on track. The upshot of these developments is that future need for baseload generating capacity may fall by more than 28 GW, according to the study’s authors. That should lead to integration of more renewable energy into the grid and should further reduce the need for natural gas plants.
A Shift Away from the Coasts
The other important development that took place during the Covid-19 pandemic was a migration away from major cities to other urban centers. In New York, that migration had been a slow and steady drip in the last decade. The pandemic accelerated that drip into a flow. As tech companies allowed employees to work from home indefinitely, several workers moved away from California to other states. Based on reports, states like Texas, Utah, and Florida are major beneficiaries of the exodus from urban centers.
These shifts will impact overall electricity demand in these regions. More residents mean higher gross domestic product that, in turn, translates to more electricity demand. Texas already boasts the most demand for electricity among states and relatively fewer energy efficiency standards. In a note earlier this month, Travis Miller, research analyst at Morningstar, predicted that the Lone Star State will extend its lead from 11% to 13% of overall demand.
That is not the situation in California. A reduction in customer base coupled with an aggressive push towards energy efficiency initiatives to reach its carbon reduction goals means that the sun will shine on their solar initiatives but not on earnings for California utilities in the next decade. A similar situation also exists for New York’s Consolidated Edison, which is already under fire for its handling of the Covid-19 crisis. Meanwhile, Florida’s NextEra Energy should benefit from an influx of new arrivals to the Sunshine state. The utility, which was reported to have put in a bid for Duke Energy earlier this year, witnessed a 1.5% uptick in new customers last year and has predicted 2% growth in electricity demand for next year.
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