THE IMPACT OF COVID-19 ON CALIFORNIA ELECTRICITY DEMAND
Two of the primary variable inputs to our modern economy are labor and energy. We are all watching the labor markets and the record unemployment claims week after week. Last month, we also have witnessed, for the first time, negative oil prices caused by disappearing demand.
But here I will focus on probably the most important input, electricity. What is happening with power consumption while California shelters in place?
ELECTRICITY USAGE WHILE CALIFORNIA SHELTERS IN PLACE
Take a moment and imagine functioning without electricity for a few days. No internet! No laundry, no oven… No lights! No off-line computer games, no TV! I would probably panic as HAL 9000 did in 2001 Space Odyssey: "Dave, stop. Stop, will you? Stop, Dave. Will you stop, Dave? Stop, Dave. I'm afraid."
We are not at that stage thanks to CAISO power transmission infrastructure. As well, we are not likely to be in such a dire situation. Homeowners are investing in solar panels at an accelerating pace, and using self-generated power. In our shelter-in-place economy, demand for oil & gas is not a good proxy for economic activity. On the other hand, electricity consumption would be a good estimate for economic activity. After all, what is not consumed at the office will be made up for at home, right? It is a digital economy after all. Certainly, home usage has increased, but what about the total? Last year, roughly 1/3 of the electricity in California is consumed at home.
Look at the daily average electricity consumption in California in the first four months of 2020 and compare this to 2019.
- What was January and February like before the COVID scare took full effect?
- What was March and April like when people gradually observed the shelter in place advisory?
- Were the patterns different for different days of the week or hours of the day?
AVG. DEMAND IN WEEKDAYS OVER YEARS [JANUARY, FEBRUARY, MARCH]
This graph shows the total load (residential, commercial, industrial) on the California system in each hour of the day for different days of the week. Electricity load in the first three months of 2020 has not changed much year-over-year. Whatever difference there is, it is during daylight hours. More behind the meter solar power is being used and more homes are producing their own energy from roof-top solar during the day.
When we look at March vs April in 2019 and in 2020, we see a different picture. All days in April 2020 resemble the weekend. Whereas in 2019 the weekends have lower demand as is expected, now, every day looks like the weekend!
AVG. DEMAND IN WEEKDAYS OVER YEARS - [MARCH, APRIL]
The weekday usage is down about 8% from last year's April as you can see in the table below. I first thought that this was not bad, but then I remembered that the average profit margin in Russell1000 companies is about 2%. These "small" differences matter.
Another curious thing is that the demand is lower even during the weekend compared to last year. I bet these are all the shops and businesses that used to be open on the weekend but are now closed.
AVERAGE AND TOTAL DEMAND OVER YEARS - [MARCH, APRIL]
Please share your thoughts in the comments section.