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How has Covid-19 Changed Electricity Demand in the United States?

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  • Nov 30, 2020 11:56 am GMT
  • 285 views

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.

Discussions

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Ben Ettlinger's picture
Ben Ettlinger on Dec 1, 2020

Thanks Rakesh.Infomrative as always. Do you have any more detailed stats on this?

Rakesh  Sharma's picture
Rakesh Sharma on Dec 2, 2020

You might want to check out links from the piece. 

Mark V. Burlingame, CPA, PMP's picture
Mark V. Burlingame, CPA, PMP on Dec 7, 2020

Rakesh,

 

Rakesh,

Good article and very insightful. However, as a former Texan with 40 years of experience in the energy industry, I have to say that using the Sierra Club as a source on anything regarding the energy industry is like using Bernie Sanders as an expert on the efficient market theory. Objective insight is not their goal.

While states such as CA opt for Bernie Sanders/Sierra Club command and control of electricity and natural gas utilities and customers, other states such as TX opt for market-based solutions.  TX demand increases because businesses such as Toyota, HP, etc. are fleeing high-cost over-regulated command and control economies such as CA to relatively free-market states like TX. As an example of the superiority of free markets over Sierra Club histrionics, Toyota's new North American HQ in Frisco, TX is replete with energy efficiency measures and renewable solar energy. Not because Toyota was required to do so by excessive government fiat, but because it chose to do so.

TX's increased demand is due to its economic growth and has little to do with "relatively fewer energy efficiency standards." 

Rakesh  Sharma's picture
Rakesh Sharma on Dec 8, 2020

Mark, your assessment is open to debate (as is mine).

I could quibble with your definition of "market-based solutions" (what does it mean anyway? It seems to be a useless phrase (and a favorite with policymakers and politicians) to describe everything from oligopolies to electric grids with very few players). 

Or, I could argue that the state is positioning itself to attract a completely different kind of industry as compared to California.

Or, I could argue that Texas's weather and renewable energy creds have made it attractive to manufacturers who need high amounts of electricity. 

By the way, I cited the fewer energy efficiency standards to illustrate that energy efficiency measures will not eat into future demand growth as they might in other states. Re: Sierra Club piece, if you read the full piece, you will find that the author wants more energy efficiency measures not because there is anything wrong with the grid. ACEEE ranks Texas 26th in their energy efficiency rankings. Wyoming scores last.  

Rakesh  Sharma's picture

Thank Rakesh for the Post!

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