Will Coronavirus Grow or Shrink Electric Demand?
by Bob Shively, Enerdynamics President and Lead Facilitator
I recently was asked an interesting question by a coworker (by virtual communication, of course!). She wrote: “What will be the effect of the coronavirus on electric demand? Will it go up because everyone is working from home, or will go it go down because businesses are closed?”
My response was “that’s a good question!” So here is some data that helps us logically think about how demand might be affected.
Energy Matters, the publication of the American Energy Society
, reports that electric demand in Italy has fallen by 18%:
Source: Energy Matters, Series 6, Issue 7 - the week of March 23, 2020
The Wall Street Journal last week reported anecdotally that demand in Seattle suburbs had seen about a 3% drop.
So we thought it would be interesting to take a quick look in demand in two of the most affected areas in the U.S. served by ISOs – New York and California. Here is what we found:
Realizing there may be other contributing factors like weather and amounts of rooftop solar, these graphs seem to show an interesting contrast. This week in California where the “shelter in place” rule has taken hold in many cities, demand seems to have fallen significantly around the clock. But in New York, demand in the middle of the day has risen, perhaps due to everyone working and playing at home when they are normally at work. This may partially be because the relatively dense buildings in the New York City area still require many to keep their lighting and HVAC systems running whereas less-dense buildings are more easily shut down. But we’ll need to see more data and research to make firm conclusions.
Meanwhile what we can say is that if we enter a prolonged economic downturn, electric demand will fall. In the last two recessions (the Great Recession kicked off by the subprime mortgage crisis in 2009 and the dot-com crash in 2001) electric demand fell in the first year by about 5%. In each case, it took five years to get back to the level it was prior to the downturn.
No one yet knows how deep the economic effects of the coronavirus will be or how quickly the economy may bounce back, but it seems increasingly likely we will see a significant drop in electric demand over the next year. Electric utilities that do not have regulatory mechanisms to protect their revenues when demand falls should prepare for reduced earnings. And utilities with such mechanisms should prepare to communicate why rates are increasing in a time that customers' incomes are declining.
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