January/February 2021 | Vol. 26 No. 1
by Fred Ashton, Economist, NEMA
The COVID-19 pandemic has transformed how we work, how we learn, and how we participate in the broader economy. No sector was spared from the disruption, including utilities.
As depicted in the nearby graph, the residential sector end user accounted for 38 percent of electricity sales, the commercial sector 36 percent, industrials 26 percent, and the transportation sector less than 1 percent in 2019, according to data from the U.S. Energy Information Administration.1 As businesses were forced to close and many began working from home, the end market for electricity shifted. Year-to-date through September 2020, the share of electricity sales rose to 40 percent for the residential sector and dipped to 35 percent and 25 percent for the commercial and industrial sectors, respectively.
The distribution of electricity sales was not the only noticeable change for the utility sector. The amount of electricity sold also changed. Overall sales fell 4.1 percent year-to-date through September as sales to the commercial sector dropped 6.6 percent, industrials sank 9.3 percent, and sales to the transportation sector plunged 16.6 percent. As expected, the increase in working from home yielded a gain of 1.7 percent in sales to the residential market. The U.S. EIA expects that for calendar year 2020 retail sales of electricity will drop 3.6 percent.2 On the production side, EIA projects electricity generation to slide 2.7 percent in 2020 to 3.859 trillion kilowatt hours before rebounding 0.5 percent in 2021.
The drop in electricity production and consumption have not been limited to the United States. According to report from the International Energy Agency, electricity demand was “depressed by 20 percent or more during periods of full lockdown in several countries, as upticks for residential demand [were] far outweighed by reductions in commercial and industrial operations.” IEA likened the shape of demand to “that of a prolonged Sunday.” By their estimates, global demand for electricity could fall by 5 percent with 10 percent declines in some regions.3
The drop in sales of electricity will likely result in lost revenue resulting in delayed investment for new electricity infrastructure. ei
1 https://www.eia.gov/todayinenergy/detail.php?id=43636
2 https://www.eia.gov/outlooks/steo/report/electricity.php#:~:text=EIA%20 forecasts%20that%20the%20consumption,increase%20by%202.5%25%20 in%202020.
3 https://www.iea.org/reports/global-energy-review-2020