Dramatic disruptions in daily life have been among the largest ripple effects of the COVID-19 pandemic. Amid job losses and economic hardships, we are also observing a shift in power usage and the demand curve.
It can be tempting to look at these significant changes and draw large conclusions. But with extraordinary short-term circumstances comes an even greater need to stay focused on long-term planning.
Flattening a Different Curve
Lockdowns and shelter-in-place orders across the United States and around the world have contributed to noteworthy shifts affecting the power industry. Public Utilities Fortnightly reports that electricity usage in the United States in the first four weeks of April was down 5% compared to the same period last year. In fact, wind power has exceeded coal-fired generation on three days in 2020 — something that had never previously occurred.
Industrial facilities have largely gone offline or operated at sharply reduced capacity, aside from those in critical sectors, owing to safety concerns and reduced demand. This appears to be more of a temporary trend as the United States gets back to work and consumer demand rebounds. While this has made a serious dent in current energy demand, we believe it is less likely to represent a permanent shift. Working from home is not a practical option in this sector, so it should bounce back to levels that are relatively easy to plan for and control.
In the meantime, energy demand has been spreading out more across the day, with fewer and less dramatic ramps in demand, especially true in the evening ramp when loads tend to peak. As the demand curve moves toward a flatter profile, there is less call for expensive power from peaker plants, ultimately resulting in less cost to households — a positive sign in an otherwise bleak economic climate.
It’s reasonable to assume that supply chain disruptions exposed by the crisis could lead to a shift in strategy to domestic suppliers to reduce exposure brought on by the crisis. This could lead to a longer-term increase in industrial capacity, further intensifying the ramps on the demand curve.
Commercial and Consumer Evolution
The changes being witnessed in commercial and residential loads may prove more complicated to project. Many of these changes go hand in hand. With so much of the U.S. workforce working from home, commercial spaces have reduced electricity needs. Additionally, the work-from-home lifestyle also seems to be contributing to spreading energy-intensive activities throughout the day, further distributing demand and reducing peaks.
Consumer trends also appear to be shifting. As anxious customers spend less money in the near term, some retail and commercial businesses may see temporary closures become permanent. This is further impacted as consumers are forced to become more comfortable and proficient with ordering online and receiving products via delivery. This, along with working from home, could change from a short-term trend into a long-term shift in habit. Large corporations with robust shipping processes will likely capitalize.
Even after lockdown orders are gradually lifted and people begin returning to work — and already are, in some locations — there is every reason to believe the demand for space and power will be diminished. The corporate and commercial worlds have witnessed a powerful demonstration of how successful working from home can be. There will always be a need for face time and social camaraderie, but if working from home becomes a more acceptable alternative, especially in white-collar jobs, this should lead to reduced need for square footage of office space. Ripple effects follow through the economic ocean.
Change Is in the Wind
Even as we see overall energy demand dip and coal-fired generation plunge in the first portion of 2020, the U.S. has also witnessed a record 1,800 megawatts of wind power come online through the first quarter. This figure likely can be attributed partly to the Production Tax Credit (PTC) for renewable projects. Given the country’s commitments to decarbonizing the energy sector and the strong showing of wind generation in the current climate, support for an extension to the PTC could become part of a congressional infrastructure capital package.
Major metropolitan areas around the world are experiencing some of their cleanest, clearest skies in years due to reduced emissions from both electrical generation plants and dramatically fewer cars on the road. This vivid demonstration of smog reduction could further boost clean air activism. Clean energy was already a top concern for consumers, according to Euromonitor International, a global market research firm.
Such activism could further intensify demands for corporations to pursue carbon neutrality as a selling point. Recent months have already seen Delta Air Lines announce a major commitment to becoming carbon neutral, while tech titans like Facebook, Alphabet and Apple are investing in renewable generation to support data centers. Indeed, S&P Global calculates 64% of corporate-tied renewable capacity either online or planned in the U.S. is contracted to technology companies.
One powerful lesson from the pandemic has been that, under the right circumstances, the unimaginable can become the undeniable with lightning speed. Electric utilities would be well-advised to keep that in mind as they develop and adapt long-term plans for growth and integrating diversified generation resources. Some things may bounce back to conditions approaching the previous status quo; others could call for reprioritizing plans or at least contemplating broader scenario variations.
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