COVID-19 Likely to Accelerate Energy Transition in the Power Sector
Pandemic dramatically alters energy consumption patterns, leaving suppliers vulnerable.
DENVER (July 30, 2020) — The COVID-19 pandemic has dramatically altered electricity consumption patterns, shifting energy supply and demand curves that may lead to structural changes in the U.S. power sector sooner than previously expected.
According to a new report from CoBank’s Knowledge Exchange Division, the recent load recovery appears to be short-lived and energy demand is unlikely to revisit pre-pandemic levels before 2022.
“Traditional relief measures for energy suppliers like accelerated load recovery, higher wholesale power prices or rate relief might not be available this time around,” said Teri Viswanath, lead economist, power, water and energy, CoBank. “This leads us to believe that the power sector will likely need to make tough choices to navigate the pandemic.”
The available avenues for upstream adaptation start with belt tightening. Namely, shifting or deferring capital spending and reassessing underutilized assets are in order. More to the point, the prospect of a sustained drag on demand might fast-track coal unit retirements, as owners simply find the operating overhead too burdensome.
Generation losses over the past quarter have largely been borne by U.S. coal-fired power plants. Coal generation’s market share has been trending down since 2010. The pandemic has intensified fuel competition, accelerated this development and possibly fast-forwarded what would have otherwise been a decade-long cycle of energy transition in the U.S. dispatch stack.
The full report, “Power Sector Demand Destruction Forces Hard Choices,” is available on cobank.com.
CoBank is a $158 billion cooperative bank serving vital industries across rural America. The bank provides loans, leases, export financing and other financial services to agribusinesses and rural power, water and communications providers in all 50 states. The bank also provides wholesale loans and other financial services to affiliated Farm Credit associations serving more than 70,000 farmers, ranchers and other rural borrowers in 23 states around the country.
CoBank is a member of the Farm Credit System, a nationwide network of banks and retail lending associations chartered to support the borrowing needs of U.S. agriculture, rural infrastructure and rural communities. Headquartered outside Denver, Colorado, CoBank serves customers from regional banking centers across the U.S. and also maintains an international representative office in Singapore.