As lock-downs have been put in place around the world due to COVID-19, many countries have experienced reductions in their electricity demand. The following graph was widely published showing typical drops in consumption
It can be seen that drops of 20% or more have been seen in some countries as the lock-downs have dramatically impacted their economies, shutting down many commercial and industrial activities in those countries.
An argument has been made in Australia that we are seeing “significant” demand reduction and that this has flowed through to drops in wholesale electricity prices.
However the evidence to say that there has been significant demand reduction in Australia due to the pandemic is not clear. For the month of April – the first full month of lock-down in Australia – total electricity consumption across the NEM was only down by 3% compared to April in 2019. The breakdown by State showed a 5% reduction in NSW, 2% in QLD, 1% in VIC, 3% in SA and a 3% increase in TAS. This against a back-drop of declining year-on-year demand already occurring in the NEM due to, amongst other things, increased roof-top solar penetration.
Note that comparing months from different years you do need to be careful as numbers of weekend days and holidays in a particular year can make a difference, but these two years were very similar, both had 8 weekend days, and Easter occurred in both years. The main difference was that ANZAC Day in 2019 fell on a weekday, so there was one additional non-business day in 2019 compared to 2020.
Looking at more detail at each State we can deduce some possible reasons for changes by looking at the average load profiles
The NSW base load as shown by the average overnight load does not appear to have changed at all. This means that the large 24/7 industrial load has not been impacted.
Daytime usage in NSW is down but it is consistently down across Business and Non-Business days. If this was caused by the lock-down you would expect to see little change across Non-Business days. So the reduction is likely caused by something else. Roof-top solar will be responsible for some of the decline however 800MW is too great a change to be just from this. Temperatures in NSW were much warmer in April 2019 than they were in 2020. According to BOM mean temperatures in 2019 were almost 2C warmer than average (5th hottest April on record). In April 2020 mean temperatures were back to average. The reduction in energy use for the month is likely to be as much to do with more air-conditioning required for cooling than any impact of the lock-down.
As with NSW, in QLD there appears to be no change in the baseload, industrial 24/7 demand.
Unlike NSW, there is a difference between the changes to Business day and Non-Business day demand. While there is a small change during the middle of the day on Non-Business day, potentially due to increased roof-top solar, the drop on Business days mornings is greater and may be due to changed behaviour due to lock-down. The numbers are still quite small – 10% at most during these periods of greatest change.
In VIC there is still no change in the large industrial demand.
Non-Business day consumption is largely unchanged from 2019 meaning that the reduction in Business day demand may be due to the lock-down. Once again the numbers are not large – 7% at most during the periods of greatest difference.
In SA there again is little, if any change to the industrial demand.
The big drop (130MW) in both Business day and Non-Business day demand indicates something other than the lock-down being the driver. I would surmise this is largely due to increased roof-top solar over the period.
There is little evidence of much change in demand caused by the lock-down alone.
Finally for completeness we can see the TAS demand profile. As noted at the start TAS actually increased demand in 2020 compared to 2019.
Other factors such as the weather rather than the lock-down are likely to be more of an influence on this demand variation.
In summary, while there may be some impact on demand due to the lock-down, the evidence is not clear that it is anywhere near as substantial an impact as there has been in other countries. In some ways this is an intuitive result in that the Australian economy was not shut-down to the same extent as many countries. Large industrial consumers have continued with little change to their output and hence demand. The main change has been reduced commercial use which appears to be largely offset by increased residential demand.
Finally, a comment on the impact of the virus on wholesale electricity prices.
Prices have fallen dramatically, however the bulk of the change happened well before the virus became a problem, and certainly well before Australia locked down. For example in October last year VIC futures prices for 2021 were above $80/MWh. Between October and March this year the prices fell by over 30% to around $55/MWh. During the period of the lock-down prices have been relatively steady.
Futures prices have been much more impacted by other factors such as a relatively benign (price wise) summer this year, increased renewable generation and reduced fuel costs.