by Mark Watson, October 29, 2020
Houston — A new study indicates that by the end of 2025, the COVID-19 crisis would likely diminish electricity usage by 65.2 TWh to 158.8 TWh, or 1.6% to 4%, reducing the need for baseload generation by 28 GW, about which industry observers differed Oct. 27.
The Columbia University Center on Global Energy Policy announced on Oct. 26 the publication of a new research paper, “Potential Implications of the COVID-19 Crisis on Long-term Electricity Demand in the United States,” by A.J. Goulding, a non-resident fellow of the CGEP and president of London Economics International, with research by LEI’s Mugwe Kiragu and David Nour Berro.
“Experience from the [2008-09] global financial crisis suggests that load is unlikely to immediately revert to previous levels following the impact of COVID-19, and that load growth may be further dampened,” the report states.
COVID-19-related reasons for weaker power demand include the following, according to the study:
- A shift to working from home
- A shift to shopping online
- Less overnight travel
- Less frequent eating at restaurants
If the power sector and regulators fail to adjust to this new situation, consumers may face unnecessary added costs, and investors could face substantial losses, the paper states.
However, Travis Whalen, a power market analyst at S&P Global Platts Analytics, said the CGEP report’s load decrease projections “appear to be overstated, particularly in the commercial sector.”
The report projects that by the end of 2025, COVID-19 will have decreased annual power demand by 4 TWh to 47 TWh in offices, by 111 to 193 TWh in the retail sector and between zero and 33 TWh in the hospitality sector.
Platts Analytics expects similar declines in load but because of previous trends in energy efficiency and distributed generation, not COVID-19, Whalen said in an Oct. 27 email.
“Ongoing analysis of coronavirus impacts to demand has indicated that most regions across the country are at pre-COVID levels,” Whalen said.
In contrast, Campbell Faulkner, OTC Global Holdings senior vice president and chief data analyst, said the CGEP report “fits pretty much in line with what I have been theorizing and seeing from load data.”
“[It] makes perfect sense for a 3% decline to appear when there is moderate, or in this case severe, economic contraction,” Faulkner said.
“The assumption of growth in residential power consumption replacing the sharp decline commercial demand seems far-fetched due to the ‘relatively’ smooth 24/7 loads that residential consumers place on the grid,” Faulkner said. “Overall, the efficiency gains at the residential level via [heating, ventilation and air conditioning] upgrades, more efficient appliances, lights, etc., mean that the climb back up to 2019 load could take even longer than the more aggressive pessimistic case.”
Timothy Fox, a research analyst at ClearView Energy Partners, an energy market consultancy, said the CGEP report’s findings “appear to align with” the US Energy Information Administration’s most recent Short-Term Energy Outlook, which concludes that power demand to total 3,657 TWh/year in 2020, down 3.2% from a three-year national average.
Matthew Cordaro, a former Midcontinent Independent System Operator president and CEO who now resides in New York, said he expects “COVID-suppressed power demand will probably remain at its current level into the middle of 2021 and increase gradually thereafter.”
“Baseload capacity will probably underrun earlier projections preceding the pandemic, first because of less need with an economy that must reestablish itself and a delay in the ambitious schedule for renewables set earlier,” Cordaro said. “The main exception to all of this would depend on dramatic political developments following the upcoming election.”
Randy Jones, principle at Mountaineer Market Advisors, a Texas-based energy market consultancy was not surprised by the CGEP report’s projections, given the shift toward working from home.
“The change will likely be a ‘sticky’ one as many businesses find ways to optimize around the arrangement and more advanced tech tools are developed to support the shift,” Jones said.
But Joshua Rhodes, a research associate at the University of Texas Webber Energy Group, held out hope for electrification expanding power demand. “I think longer-term we will see more electricity use as transportation and (later) heat electrify, but a lot could be impacted by what happens in the election and how a stimulus bill might impact investment,” Rhodes said in an Oct. 27 email.
Some areas might have lower power demand “but not all,” Rhodes said.
The report suggests that independent system operators adjust their capacity mechanisms “to reflect long-run demand destruction.”
“In 2019, capacity cost consumers in New England and PJM alone a total of $12.4 billion,” the report states. “Reducing this number could provide meaningful savings to consumers.”
Please find the article linked here including full coverage: COVID-19’s long-term effects may cut need for baseload generation: study