It has been less than a week since states and major cities began instituting quarantines along with stay-home and shelter-in-place directives to reduce the spread of COVID-19. The full impacts on electricity usage are not yet known, but grid operators say demand is both shifting and falling. Data from overseas may give an indication of just how steep the declines could become.
Italy instituted lockdowns and closed essential businesses earlier this month, in response to a spike in novel coronavirus infections. According to the Electric Power Research Institute (EPRI), the country has since witnessed a significant decline in electricity demand.
Five to seven days after Italy’s lockdown began, the country saw an 18% to 21% reduction in peak demand and energy use on a year-over-year basis, according to EPRI data. The demand decline began with a more modest 10% reduction in peak demand in the first two days after beginning its lockdown on March 12 and 13.
In the United States, grid operators say it is too soon to get a firm handle on the impacts of coronavirus shutdowns, but some are already seeing usage declines. Propelling those declines, S&P Global is predicting a global recession this year and estimates the United States economy will see a 6% seasonally adjusted second-quarter contraction before beginning to recover in the second half of the year.
“In the near term, utilities will likely see some reduced sales volumes as major sporting events, concerts and businesses scale back drastically, compounded even further by social distancing requirements being mandated or recommended by federal and local governments across North America,” S&P said in a March 19 report.
While the firm believes “the majority of North American regulated utilities are well-positioned to handle the immediate impact of COVID-19,” the report also warned a few with “disproportionate exposure to [the] commercial and industrial class of customers could be vulnerable to reduced sales volumes.”
Some of those impacts could be passed along to consumers, according to James Newcomb, managing director of emerging solutions at Rocky Mountain Institute (RMI).
“As a consequence of lower energy use and lower capacity demands from the system, utilities will collect less revenue in the form of rates during this downturn of industrial productivity and economic activity,” Newcomb told Utility Dive in an email.
While some of this lost revenue will be mitigated through cost reductions including lower fuel expenditures, Newcomb also said RMI’s preliminary assessment indicates “this will only mitigate part of the lost revenue.”
“Utilities may ask regulators for increased cost recovery through rate increases in the future as a result,” Newcomb said, adding that this will also depend on specific-state policies such as decoupling.
However, investment research platform SSR estimates that utilities in the early stages of rate cases right now will be very vulnerable and could have their return on equity lowered by regulators. SSR identified the four most vulnerable companies as Michigan-based CMS Energy, Duke Energy, Hawaiian Electric and Pinnacle West Capital, the parent company of Arizona Public Service.
“They’re on the front line because they’re the first ones in before regulators,” Eric Selmon, report co-author and co-head of SSR’s utility and renewable energy research, told Utility Dive. “Deferring their rate cases may be the best thing they can do,” to avoid pressure from regulators. Because of limits on public meetings, he added, the rate cases may be put off by the commissions as well.
While the impacts on electricity demand are only beginning to emerge, grid operators around the country are reporting demand declines and shifts in load shapes.
Load declines, shifts in major markets
ISO New England, in a Friday blog post, said it has witnessed a decline in system demand of approximately 3% to 5%, “compared to what would normally be expected under weather conditions in the region.”
Along with demand reductions, the grid operator said the changes are also affecting demand patterns across the region.
“ISO forecasters see load patterns that resemble those of snow days when schools are closed and many are home during the day,” the grid operator said. “These patterns include a slower than normal ramp of usage in the morning, and increased energy use in the afternoon.”
Leave a Reply