Electricity demand: you couldn’t kill it with a stick

When the COVID-19 pandemic first swept the world at the start of March many governments responded by imposing tough restrictions on commercial and consumer activity to try and slow the spread of the virus.

Northern Italy was the world’s first epicentre of the pandemic, a spike in infections and deaths caused by a slow and casual response by local and national governments. The ensuing tough lockdown all but confined north Italians to their homes for weeks, reducing electricity demand by around 20 per cent. Electricity demand was seen, logically, as a useful indicator of economic activity and, more ominously, a leading indicator of the health of the economy.

In the middle of its two-month lockdown Italy’s electricity demand set a new record low of 19,900 GWh for April, well below the average of around 26,600 GWh. This was matched by a sharp and painful recession in Italy, cutting GDP by more than 17 per cent in the second quarter of 2020 on a year-on-year basis.

Percentage reductions of electricity demand after implementing lockdown measures in selected countries, weather corrected. Source: IEA

Italy was one of the most extreme cases of a global phenomena. COVID-19 lockdowns turned weekday electricity demand into weekend demand. Bearing in mind milder weather in spring and autumn driving naturally soft demand, the lockdowns drove seasonally adjusted electricity demand cuts in key European economies of between 10-20 per cent over this time. Italian electricity demand post-lockdown has been back to more normal seasonal levels over the summer, although there are still doubts about how fast its economy will follow.

Electricity demand in Australia has been much less affected by the lockdowns, with estimates of a seasonally adjusted fall in demand of 1-2 per cent as a result of COVID-19. The economy contracted by around 0.5 per cent in 2019-20 and is expected to contract a further 2.5 per cent in 2020-21. Sharpest reductions are in accomodation, food and services, the arts and retail.

Australia’s sticky electricity demand may be due to the transfer of demand from commercial to residential, as more Australians stay home to work. Analysis of Victorian electricity demand by Energy Networks Australia showed a 20 per cent increase in residential electricity demand across most of Victoria in Q2 CY2020, while small business demand was down 10-15 per cent and large industrial demand varied in response to rapid changes in demand.

Change in residential electricity demand April 2020-vs 2019 Source: ENA

These transfers have basically negated aggregate demand changes for electricity. Australia’s stock of large, energy-inefficient houses is soaking up most of the demand left behind by shuttered offices, restaurants, theatres and retailers.

Daily electricity demand in Victoria 11 Jun to 9 Aug in GWh/day Source: OpenNEM

Last week was the first of Victoria’s tougher Stage 4 lockdowns and, as if the prove the point, electricity demand increased! For the preceding three weeks total mid-week daily demand hovered around 140GWh per day in Victoria. Under the first week of Stage 4 conditions, this increased to around 150 GWh per day.

It’s hard to draw too much from one week of data – it was noticeably colder in south-eastern Australia last week – but there isn’t much yet to suggest that tougher restrictions are going start denting electricity demand any time soon.