The baseline economic view now assumes a recession for 2020 Q2 to Q4 with a turnaround in Q1 2021 for Gross Domestic Product in the US (Wood Mackenzie estimate). JP Morgan sees the economy contracting by 40% in Q2 and unemployment reaching 25 million job losses (20% unemployment). Do we repeat the 2008/2009 turnaround for a “V-shaped” economic recovery or do we see a very different shape to the economic recovery? There were differences in the causes of 2008/2009 as opposed to the speed of the coronavirus impact which may delay how quickly we recover.
Wholesale energy demand has slumped since the stay at home order has impacted jobs and the economy. For example, PJM (which operates a wholesale electricity market in the Northeast) reports weekly energy forecasts are down by 5 to 7% through the end of March and likely lower. Other wholesale electricity operators are reporting similar trends. Since demand is lower, cheaper resources are used to meet demand. This favors an increase in wind and solar transmission connected resources, since the US Energy Information Association reports lower variable costs for these resources. Both the California Independent System Operator and PJM report renewables (from all sources) are 12% of grid dispatch. As the market clears for low cost, less air emitting resources, both pollution and prices should drop in the near term.
- Fossil fuel generators are running less due to lower demand, based on preliminary data from March and April. Experts say it may also slow investment in energy efficiency and clean energy projects. (RMI)
- In addition to changes in load and energy usage, operators are also seeing shifts in the timing of demand. “One of [the] clearer signals from the past few weeks is a changing load shape as people stay home and office buildings, whose lighting and HVAC loads are a big driver of afternoon peaks, have seen their occupancy fall, This has caused an observable flattening of the load curve in many regions, from one with a twice-daily peak (characteristic of normal springtime shapes) to a flatter, lower peak.” (RMI)
- The New York Independent System Operator (NYISO) is observing daily peak loads trending about 4% lower than typical for this time of year, officials said.
- The Electric Reliability Council of Texas (ERCOT) said that while it has seen little impact to daily peaks, morning loads are currently 6% to 10% lower than what forecast models would typically predict. Based on the data from the weeks of March 22 and 29, weekly energy use is down by approximately 2%.
- In the Midcontinent Independent System Operator territory, the grid operator says its load shape “continued to shift during the last half of March as more states implemented stay-at-home orders. Morning and evening load levels are lower than normal and morning peaks have moved closer to noon compared to 9 a.m. in previous weeks.”
- The New England Independent System Operator said it is still seeing load declines of 3% to 5%, similar to what it witnessed two weeks ago.
- In the Southwest Power Pool (SPP), officials said they are witnessing a 4% to 6% reduction in load, compared to similar days and temperatures for previous years.
- In California, grid operators from March 17 to March 28 saw load reductions of 5% to 8% on weekdays, and 1% to 4% on weekends, with the heaviest impact occurring over the morning peak hours. “Based on experiences in Italy and Spain, the ISO expects load reductions to level off about three weeks after the [shelter-in-place] order’s implementation. The California grid operator saw day-ahead market prices decline $5/MWh, when compared to before and after March 17, while real-time market prices saw a reduction of $10/MWh.”
- And in Florida, immediately after the stay-at-home order went into effect last week, there was a clear drop-off in demand of more than 10%. However, warmer temperatures in the past few days have pushed air conditioning loads back up. (RMI)
- Looking ahead, there could be changes to the national fuel mix due to the coronavirus shutdown. “Going forward, we would expect to see coal generation fall faster than gas, as gas fuel prices are depressed due to falling demand and coal plants, especially when gas is cheap, are generally more expensive to operate, We anticipate that even this temporary, near-term drop in load might lead to long-lasting impacts on coal plants, whose economics get worse as they run less, and set off a fresh wave of retirements.” (RMI)
- In addition to changes to load shape, energy usage and the nation’s fuel mix, the pandemic could have longer-term implications for clean energy projects. “But what may be a bigger impact is the long-term effect of paused or slowed investment in both generation projects and behind-the-meter efficiency programs. The present crisis has pushed ‘pause’ on the investment necessary to meet increasingly aggressive climate and clean energy goals set by states across the US.” (RMI)
Early indication from metropolitan transit ridership indicates a substantial drop for ridership on trains and buses. For example, Orange County California bus ridership reported a 40% drop with stay at home orders. While pictures of urban areas show no traffic on city streets, metropolitan operations and maintenance expenses are rising with sanitization efforts, offsetting some of the lower fuel costs. Discretionary ridership may require a long period of recovery as work at home efforts may stall recovery.