Power demand in Lockdown – Initial COVID-19 impact on the power market

The power and gas systems are mirror images of the wider economy, entering practically every aspect of work and leisure. They naturally face challenges as a result of the effects of the COVID-19 virus on the way we work, travel and live.

Electricity demand has reported to have fallen in other European countries as the measures to contain the virus have reduced industrial output. Reuters reported on 19 March that RTE (the French Transmission System Operator) was seeing demand 15% lower than normal levels due to the lockdown imposed since Tuesday.

The effects in GB last week were less pronounced, with demand in 2020 in some cases higher than the 2019 values for the same time. This is likely due to most elements of the economy still functioning, no large industrial consumers had announced closures and more and more people were working from home spreading and increasing the load. With a rise in home workers there could even have been an increase in telecommuncations and server load to cope with the rising bandwidth requirements.

However, last week Jaguar Land Rover notified it would be ending its GB activities from 23 March and re-opening in week 20 April. More retailers closed their doors including Burger King, Greggs, Primark to name a few. At the same time the government and rail companies agreed a new timetable to provide reduced services to match demand. These are large electrical loads, and we can expect more reduced activity over the coming weeks. On Monday 23 March (before the lockdown) demand was down 9% across the day versus an average March Monday in 2019.

The government announced a lockdown on Monday 23 March and this resulted in further reductions. We can see demand forecast for Wednesday 25 March is lower than the average Wednesday in March 2019 down on average 13% across the day. This is most notable in the morning peak and middle of the day, when we would normally expect industrial and commercial load to be ramping up.

Demand comparison of March 2019 against March 2020 showing the effects of COVID-19 virus

Low demand means lower prices, alongside the impact of falling input fuel and carbon prices as the demand across the globe reduces. This has pushed the day-ahead price for Wednesday 25 March down 39% compared to an average Wednesday in March 2019. The Single Imbalance Price has also seen notable reductions, with lower demand and high wind output and only the most efficient gas turbines running. Bid prices for thermal stations have fallen significantly as they try to make up some margin on lower market prices. The SIP for Wednesday 25 March is down 72% compared to an average Wednesday in March 2019.

Comparison of SIP and DAH on March 2019 against March 2020 showing the effects of COVID-19 virus

Low demand brings its own set of challenges to managing the system, the chief among which is managing system stability. With lower demand there is less space to operate larger synchronous generators. This can affect system inertia and Rate of Change of Frequency (how quickly the system responds to a change of conditions). To cope with this the ESO could constrain wind and keep thermal plant such as gas or coal running.

In low demand systems having large power stations running can pose its own risk, as failure of that unit can cause significant effects which can’t be made up by other stations which are no longer running because of the low demand. Therefore, it is likely the ESO will have to constrain interconnector volumes, nuclear power stations (where possible) and wind to cope with the risk of fault or outages.

In addition, many thermal stations may not be available to provide reserve without intervention from the ESO with the inability to increase output. Footroom (the ability to reduce output) is another issue which could prove expensive, especially in March and April where there may be high levels of expensive to constrain wind.

National Grid cancelled its latest Electricity Operational Forum to concentrate on the immediate operational issues it was dealing with. It did put on a webinar, and it noted the worst-case scenario was a fall in demand to summer equivalent levels. It has promised to keep weekly webinars available to the industry and you can sign up here.

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COVID-19 and the British electricity and gas markets

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