The Pandemic’s Impact on Utilities

Utility Business July 2020
Published On
Jul 15, 2020

U.S. electric utilities in 2020 saw customer demand drop by percentages not experienced since the Great Depression thanks to the economic shutdowns related to the COVID-19 pandemic. And, according several recent reports, electricity sales are unlikely to return to previous levels anytime soon. On the positive side, renewable generation appears to be holding its own, as free fuel costs turn solar and wind into baseload resources. The eventual hit to utilities’ end-of-year bottom lines might be significantly less than the demand drop might lead one to expect.

U.S. electricity demand was already on a downward trajectory in January; 2019 saw sales fall 1.4% over the previous year, according to the International Energy Agency’s (IEA) “Global Energy Review 2020,” released in April. However, that report also anticipates a further 4.8% drop by the end of 2020, which is a near match with an expected 5% global reduction. That figure represents the biggest global fall since the 1930s and, the report stated, is eight times the demand fall seen in 2009, in the wake of the international financial crisis.

The U.S. economy’s heavy emphasis on services, versus manufacturing, is a big reason for this decline, according to the IEA report. The service sector accounts for 40% of U.S. demand, and that was the sector hardest hit by stay-at-home orders, as millions of workers deserted offices, and hotels and restaurants shut their doors and furloughed millions more.

In contrast, 2020 demand is expected to drop only 3% in China, where industrial use accounts for 60% of electricity consumption. Manufacturers can’t simply shift production to employees’ homes, so their facilities are more likely to be considered essential operations.

As might be expected, the U.S. demand reduction picked up steam as stay-at-home orders started rolling across the country in March. Utilities’ average hourly loads dropped 3.3% over March 2019 figures, according to analysts with the Brattle Group, a Cambridge, Mass.-based energy-research firm. April saw that figure double, down 6.5% over April 2019, according to its May report, “Impacts & Implications of COVID-19 for the Energy Industry.”

Only growth in residential demand, as everyone began meeting and schooling online, helped prevent further load reductions. From February through April, residential load increased by 6–8%, according to the Brattle Group. Commercial and industrial loads, in contrast, fell by 14.5–16% during that period. These figures come from the seven independent system operators (ISOs) responsible for supporting 55% of total U.S. electricity demand.

The ISOs reported shifts in when electricity was used, and who was using it. For example, PJM, the nation’s largest system operator, saw weekday peaks drop by up to 8%. And ISO New England said the combination of lower peaks and slower morning demand ramp-ups were “like snow days.”

Even as demand fell, however, the amount of U.S. electricity generated by wind and solar resources remained steady, IEA researchers noted. Due to their virtually nonexistent fuel costs, wind farms and solar arrays are almost becoming baseload generators, with fossil-fuel options coming onboard, as needed, to meet additional demand. Renewables met approximately 20% of U.S. electricity demand through most of the first quarter, running close to even with nuclear power. Natural gas continued to dominate, meeting 38%–42% of demand, with a slight decline as lockdowns kicked in. Coal plant output continued to fall, however, dropping to 15% of overall demand by late April.

In all, according to the U.S. Energy Information Administration, utilities can expect 2020 commercial and industrial electricity sales to fall by 6.5%, each, with residential sales expected to slip 1.3%. The Brattle Group sees this falling demand to lead to lower energy prices, as average, on-peak forward prices have fallen between $2.40 to $4.50 per megawatt-hour. However, the analysts added, the revenue impacts for utilities aren’t expected to be as dramatic, due to the increased residential load and the demand charges commercial and industrial customers continue to pay, related to their individual peak-usage periods.

As of May, all 50 states and the District of Columbia had begun reopening their economies. Electricity demand ticked up slowly, as office buildings, hotels and restaurants welcomed tenants and customers again—albeit at reduced rates. But it likely will be many months, or even years, before prepandemic levels of demand return. Phased reopenings significantly limited capacity in early stages. And businesses are rethinking the importance of having all workers in centralized offices.

Of course, any predictions on how the year actually plays out could be thrown out the window if there is a second wave of the virus as the weather turns colder, as many epidemiologists believe is possible.

About the Author

Chuck Ross

Freelance Writer

Chuck Ross has covered building and energy technologies and electric-utility business issues for a range of industry publications and websites for more than 25 years. Contact him at

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