The Impact of COVID-19 Across the Energy Market

Due to the continuing crisis brought on by COVID-19 pandemic, there has been a disruption throughout the energy sector due to a lessening in demand, unstable supply chains, and decreased regulatory attention, negating the previously anticipated growth forecast. This is largely due to a slowing global economy and subsequently a slowing demand in energy. Many questions have arisen on the best way to combat these changes.  

One area largely affected is clean energy (including renewables, energy storage, and electric vehicles), particularly solar energy, which has dropped from a demand forecast of 121 GW and 152 GW to 108 GW to 143 GW. Slowing additions to the solar capacity can in part be attributed to the focus of regulators being diverted elsewhere because of the crisis created by the COVID-19 pandemic, which could affect solar energy build and storage. This slowing, along with decreased confidence in global markets, could make it harder for investors to raise capital and affect financing, installations, and power purchase agreements.

ISO New England has smoothly transitioned to remote operations, and the electrical grid continues to operate smoothly. The shift to remote work and schooling has caused a decrease in commercial demand, but an increase in residential energy use. For day-to-day consumption, the peak time for morning energy consumption has also shifted from 8a.m. to 9 or 10a.m., and peak consumption for both morning and evening have dropped by 5%. The ISO is attributing an overall 3-5% decrease in demand to the COVID-19 crisis on top of an already lower demand as compared to previous years due to mild winter and spring weather conditions.

Demand on PJM Interconnection, the country’s largest bulk power market, is 4 percent lower, with prices dropping 8 percent. In March it revised its daily forecast of about 100,000 megawatts of load given the time of year and weather to 94,500. Actual demand came in at 95,500 MW to end the month. A spokesman for PJM said he believes there will be more impact as stay at home orders are ramped up in several states, which could put even more pressure on power plants that are already struggling to compete.

The uncertainty of the best way to combat the virus and of how it will continue to affect the global economy and energy demand make it difficult to predict exactly how the energy sector will be affected and to adjust growth forecasts with any confidence, and the industry is struggling to understand the best way to address these challenges. Many energy companies have pledged to pause disconnections and offer flexible payment plans considering the pandemic. 

If the Covid-19 pandemic continues to impact demand and new solar projects grind to a halt in 2020, it will create a ripple effect in years to come.  There are a number of solutions available that can help you to balance the risk and cost through this time. An energy advisor can help you take advantage of these circumstances. They can help you navigate the complexities of the energy industry and secure energy account contracts while the market is still at an extreme low.

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