The Business Advantage of Smart & Energy Efficient Retail Stores

Lockdown measures to contain the COVID-19 pandemic have caused a significant decrease in energy consumption across the world. While work-from-home is causing incremental residential load gains, most countries are seeing a significant decrease in energy demand due to low levels of commercial and industrial (C&I) activities. This defining moment for the energy sector may be one of the first instances in many energy markets where the disruption is on the demand side while supply remains abundant.

Electricity consumption in several countries in April 2020 has decreased by as much as 30% compared in April 2019, as indicated in Figure 1. The dramatic reduction on flights, along with less use of road and public transportation, is expected to result in April recording the lowest monthly liquid fuels demand globally since 1998. The decrease in energy-intensive activities compliments a dramatic decline in global CO2 emissions, with analysts predicting that by May carbon emission levels might be the lowest recorded since 2008. The World Meteorological Organization (WMO) has stated that the pandemic is expected to drive carbon dioxide emissions down 6% this year in what would be the biggest yearly drop since World War Two.

In Asia, slowdowns in economic growth will cause peak demand to weaken as indicated in Figure 2. Certain markets where economic growth is more energy-intensive due to sectors such as manufacturing and construction will likely be the worst-hit in terms of power consumption growth. Examples include South Korea, Taiwan, Malaysia, and Vietnam. A 25% decrease in China’s energy usage in just 2 weeks of lockdown in March provides a benchmark for how quickly demand can decrease in energy-intensive economies as lockdowns continue into second and third months.

(Source: EIA, Fitch Solutions)

While experts continue to evaluate the impact of lockdowns on energy demand, the economic and social crisis that is arising from the pandemic is expected to further disrupt global energy markets. The falling costs of renewables were already causing the wholesale price of power from natural gas, coal, and several nuclear plants to slide before the COVID-19 situation escalated. The sudden decline in energy consumption due to lockdowns has further caused utilities to turn to aggressive price hedging, as seen in the recent situation of negative oil prices. For the first time in history, oil storage capacity has reached a filling point and sellers are paying buyers to purchase their supply.

How will this influence our progress towards a sustainable energy transition? That is perhaps one of the biggest questions for energy experts as the unforeseen impacts of COVID-19 comes amid a global energy transition to tackle climate change. The recent sharp decline in oil prices may undermine the momentum energy efficiency has seen in recent years, as cheaper energy usually results in consumers using it less efficiently. Difficult economic positions due to low oil prices may cause early closure of some fossil fuel plants, or governments may step in to ensure their operations to ramp up economic activity. Alternatively, cheaper oil prices could pave a way for governments to remove fossil fuel subsidies and channel them towards renewable energy alternatives.

Renewable energy supply chains, however, have been disrupted and the construction of several RE facilities has come to a halt. This will cause a significant dip in renewable energy added to our grids. The drop we are seeing in carbon emissions may as well be followed by another peak year of emissions as economic recovery takes center stage and fossil fuel-based energy generation is utilized as a crutch for boost economic activity.

Reduced energy consumption and its impacts on the energy sector could prompt multiple responses from governments and businesses. As the impact of COVID-19 unfolds, one thing is certain: the energy market is going through unprecedented change and the response of policymakers, regulators, and market participants will make or break our progress towards a clean energy transition.


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