You can’t miss it!

Weekly. Free. Your Top 10 Sustainability & Energy Posts.

Your name

Your email

Your company

Your position

You can unsubscribe at any time (read our privacy policy.)

Join us

An illuminem summary: The effects of coronavirus measures on electricity markets
An illuminem summary: The effects of coronavirus measures on electricity markets
illuminem
By illuminem
Mar 15 2021 · 2 min read

Illuminem Voices
Power & Utilities · Power Grid

Despite a lower impact globally than the oil & gas market in the short-term, electricity markets could be at odds with long-term investment decisions if the short-term coronavirus uncertainty remains.The most pronounced impact for electricity markets has been a decrease in demand. Due to social distancing and quarantine policies throughout all major economies, total electricity demand has generally fallen by around 5-10%. Estimates vary significantly by region, with EPRI finding peak and average demand down by as much as 22% in Italy, 15% in Spain and 7% in California and New York.

A natural experiment

The demand situation is creating an unexpected natural experiment in managing variable renewable energy sources. According to IEA Executive Director Fatih Birol, the demand drop "fast forwarded some power systems 10 years into the future" in regards to integrating high percentages of renewable energy.

Electricity prices are falling due to low seasonal demand, reduced demand from quarantines, and from falling input energy prices. Oil, LNG, coal and domestic natural gas demand have all collapsed, with subsequent declines in prices for each commodity.

Construction and operation impacts

Beyond demand and prices, concerns about coronavirus are impacting construction and operations activities for the electric sector. Many projects are being placed on hold or are outright canceled. Although existing renewables are unlikely to be impacted, new projects may be delayed or cut. Further, supply challenges for renewable energy, particularly from solar due to China’s prolonged lockdown, threaten current projects. Similarly, operations and maintenance activities are being deferred, particularly problematic for nuclear fleets, which often conduct refueling and planned operations outages in the spring.

In response to the economic situation, there are many policy questions about how utilities and economic regulators should manage electricity rates and bills with the economic impact of the crisis raising major questions about customers’ ability to pay. To avoid exacerbating energy poverty and worsening economic suffering, many countries are halting utility shut-offs for non-payment.

Significant financial fall out

The financial fall out for the electric power sector is already significant. Renewable companies are already shedding workers. Although utility stocks are typically seen as relatively safe havens during economic downturn, the unusual combination of large decreases in industrial demand, depressed electricity prices and uncertain quarantine length could impact utility stocks and finances.

One of the more striking impacts of the current situation is that demand declines are accompanied by potential supply disruptions. A lack of industrial demand limits the ability of utilities and markets to call on demand response, effectively removing a key source of grid flexibility. Operational constraints, especially staffing, could impact thermoelectric supply and even grid management.

Accelerated coal and nuclear retirements

In the United States, the most lasting effects of the current disruption for electricity could be accelerated coal and nuclear retirements. The 2020s look no different as aging facilities, increased competition and climate-policy pressure drive coal for power generation into a death spiral. Similarly, while the nuclear fleet is generally more financially robust than the coal fleet, low power prices in wholesale markets may lead to financial struggles at marginal nuclear facilities.

Despite good service provision to date, the electric sector must continue to prioritize system reliability and resilience in the face of unknown future impacts focusing on supply diversity, and better electric industry coordination. Economic outcomes and investment decisions during the next 18-24 months could reshape electricity markets for decades.

The original article is published on Utility Dive - click here to read the full article. Energy Voices is a democratic space presenting the thoughts and opinions of leading Energy & Sustainability writers, their opinions do not necessarily represent those of illuminem.

Did you enjoy this energy voice? Support us by sharing this article!

illuminem
About the author

Illuminem's editorial team - delivering the most effective, updated, and comprehensive access to energy & sustainability information.

Follow us on Linkedin & Twitter

Other Illuminem Voices

Keeping the lights on – the long road ahead to closing the electricity access gap in Nigeria
Olufisayo Alabi and more
Olufisayo Alabi and more
Aug 09 2022
Keeping the lights on – the long road ahead to closing the electricity access gap in Nigeria
A Visual History of Electrification in the USA
Michael Thomas
Michael Thomas
Aug 04 2022
A Visual History of Electrification in the USA