Coronavirus continues to twist and warp energy demand in the U.S., studies find
Energize Weekly, July 8, 2020
The novel coronavirus pandemic continues to torque and warp energy demand and markets in the U.S. from shifts in electricity demand to filling commercial oil storage to record levels.
Electricity demand is projected by the U.S. Energy Information Administration (EIA) to be the lowest since 2009 – 998 billion kilowatt-hours – and 5 percent below last summer. Meanwhile, monthly oil consumption fell to its lowest in April – 441 million barrels – since 1983.
Beyond the gross reductions in demand, the pandemic and its disease COVID-19 are also altering the way in which energy is used.
The bulk of the declines in electricity use are expected by EIA to be in the commercial sector – down 12 percent – and the industrial sector – down 9 percent. Residential electricity sales are projected to grow by 3 percent, as more people work and stay at home.
Warm weather is usually a primary driver of summer electricity demand, but the National Oceanic and Atmospheric Administration forecasts the cooling days – an indicator of air-conditioning demand – will be down 1 percent from last summer.
“This summer, however, other factors are affecting electricity demand more than temperature,” the EIA said. “Although state and local governments are relaxing stay-at-home orders, social distancing guidelines will likely result in Americans spending more time at home than usual this summer. In addition, many people that had worked in offices are now working from home, shifting electricity demand from the commercial sector to the residential sector.”
Between February and May 2020, more than one-third of the labor force switched to remote work, resulting in about half of American workers now working from home, according to a survey by university researchers, with young people more likely to make the switch.
That shift will translate to an average increase of 10 percent on residential energy bills in major cities around the country, according to analysis by Arcadia, a clean energy developer and residential energy service.
Arcadia reviewed 12 months of bills from 10,000 of its members across 13 of the largest metropolitan areas and compared bills before and after stay-at-home orders were issued by many states.
“Our data shows a drastic increase in energy consumption at home is expected this summer, resulting in higher costs for already financially-strained Americans,” Arcadia said in a blog post.
The sharpest increases on a percentage basis – 15 percent – comes in Philadelphia and New York City, with Philadelphia seeing an average increase of $37 a month and New Yok posting an average increase of $34. Boston residents will see an 11 percent increase equal to about $27, according to the analysis.
West Coast cities, in contrast, are slated to see lower increases. The biggest jump in monthly bills – 8 percent or $17 – would be in Los Angeles, followed by San Francisco at 5 percent or $8, while Riverside, Calif., is slated to have residential bill increases of around 4 percent, $8, and Seattle looks to see only a 2 percent increase or $2.
“These bill jumps are coming at a time when their households are already being hit by intense economic strain,” Arcadia said. “Cities such as Philadelphia (the city soon to face the highest projected energy bill increases of the 13 cities sampled) saw an unemployment rate of 5.1 percent in March, up 1.2 percent from the year prior.”
While overall electricity demand is falling, the precipitous drop in oil demand is now leading to commercial crude oil inventories reaching an all-time high at 541 million barrels the week ending June 19, according to the EIA. That was five million barrels more than the previous record set in 2017.
And there appears to be little relief on the horizon, according to an analysis by risk advisory firm DNV GL. “Our modelling now shows that the pandemic will reduce energy demand through to 2050 by 8 percent, resulting in energy demand in 2050 at almost exactly the level it was in 2018,” the consultant said.
“The reduced return on capital and the increased volatility in fossil fuel prices is making many investors look at these assets in the post-COVID world with a greater degree of caution; they may also now regard renewables assets more favorably,” the analysis said.