- Energy Industry
- Renewable Energy
How COVID-19 Changed Energy Consumption Patterns
Over the course of 2020, many US workers were asked to work from home, either indefinitely or until it was safe to return to the office. By one estimate, in September 2020, about one-third of all US workers were working remotely.
This shift to working from home has had large but unsurprising effects on the way Americans are consuming energy. A working paper by Steve Cicala at Tufts University examines this effect by studying how the shift to working from home changed patterns of electricity consumption. Unsurprisingly, Cicala finds that residential electricity consumption increased as more people were confined to working from home. Using hourly and monthly data on electricity consumption, Cicala estimates that residential electricity consumption increased 10% during the 2Q 2020 compared with its level before the pandemic. At the same time, Cicala finds a 12% and 14% reduction in commercial and industrial electricity consumption, respectively. I expect that these shifts reported from 2Q 2020 will return closer to pre-pandemic levels as the economy continues to recover and many workers are able to return to work in person. That said, many workers will likely remain out of the office even after it is safe to return—meaning we may see elevated levels of residential electricity consumption well into 2021.
How Has a Decrease in Electricity Demand Affected Power Generation?
In addition to changing shares of residential, commercial, and industrial electricity, an overall decrease in electricity demand has caused simultaneous changes in the electricity generation mix—a change that has led to a reduction in global power sector CO2 emissions according to a recent study published by Bertram et al. The authors found that global CO2 emissions decreased due to a general decrease in electricity demand caused by the COVID-19 recession and, importantly, due to a decrease in the average “carbon intensity of power generation.” Importantly, the authors found that the carbon intensity of power generation decreased because coal generation, a notoriously carbon-intensive generation technology, saw the largest drop in generation as a result of the reduction in electricity demand.
The authors argue that coal-powered electricity generation decreased more than other generation due to the “merit-order of the capacity mix of different generation technologies.” That is, when demand decreased, plants with the highest variable cost were the first to stop generating power. Fossil fuel plants have a relatively high variable cost because they require burning fossil fuels as an input and were therefore shut down before renewable and nuclear power. Renewable energy typically has a high cost of construction (a wind farm, for example) but relatively low variable cost once construction is complete. As the authors write, renewable technologies with relatively low costs per kilowatt-hour will continue operating even with reduced demand, while fossil fuel-powered plants with relatively high costs per kWh will be the first to switch off when demand falls. The study found that a large decrease in coal generation accounted for a significant amount of the overall decrease in CO2 emissions in the power sector. In all, the authors estimate that annual CO2 emissions for 2020 decreased 6.8% from their 2019 levels.
As the economy recovers and stay-at-home orders are lifted, the extent to which changes in electricity demand linger could have a large impact on the electricity generation mix. When electricity demand recovers to pre-pandemic levels, the electricity generation mix may not look the same as it did a year ago.