Post: What happens to the energy landscape during COVID-19?

What happens to the energy landscape during COVID-19?

The COVID-19 virus has highlighted our global reliance on technology and electricity. Millions of people are now confined to their homes for work, shopping, hobbies and communicating with friends and family. This represents a seismic shift in how power and utility businesses need to provide their crucial services.

We’re all aware the grid operates on a delicate balance of supply and demand. However, this is made easier to manage by a somewhat predictable profile. The unprecedented events of the last few weeks have resulted in a huge reduction in industrial and commercial demand and have shifted general demand patterns closer to the patterns of holiday periods and weekends. That said, weekends would usually see around a 10% drop in demand compared to weekdays, but with social distancing now likely to become more stringently enforced and people less inclined to go out, this becomes less likely to hold true.

We can already see a dramatic change in the general pattern of daily consumption in the last couple of days. The morning-peak-then-evening-peak shape has disappeared as consumer habits are changing. Working from home and not commuting is changing consumption patterns.

In Ofgem’s latest report, the UK’s total annual electricity demand stands at 352.1TWh. The proportions break down with domestic demand the highest at 30%, followed by industrial at 26% and then commercial demand, which includes shops, restaurants, schools and hospitals, sitting at around 21%.

At this point, we have sufficient margins of generation from both fossil fuel and renewable sources to operate the grid securely. Whilst it is generally understood that power outages occur when demand outweighs supply, in recent times blackouts have happened during times of low demand, which brings grid resilience to the fore at this time.

The rolling average demand is now falling as the lockdown measures come into force. Wind generation currently tops out at 12-13GW, and is not spiking higher, which means the percentage share of wind will increase, and there will be less flexible power on the GB system.

Power and utility organisations are typically well-equipped for emergencies, as they provide critical infrastructure. Whilst contingencies for natural disasters, terrorism, cyber-terrorism and power outages are typically in our collective focus, it’s not often we think about the widespread ramifications of a nation on lockdown.

Eamonn Bell, Head of GB Market Strategy at GridBeyond, addressed the issue of the energy markets in these uncertain times, “In the very short term we must expect some work to be put on hold by National Grid. This would be a rational response to an emergency. However, in the medium term we expect National Grid to speed up changes to system services.”

Currently the total volume of frequency response services National Grid require is capped by an industry standard technical code and is governed by the risk of the single largest generator dropping off the system. The last two major black-outs (May 2008 and August 2019) were caused by cascading problems at many small generators, so it would make sense for National Grid to review the total amount of response services they hold in light of dramatically changing, and unpredictable, system demand patterns.

Bell commented further, “We are expecting that these changes in consumption patterns will have an effect at all levels of grid operation. Power contracts struck months or years ago for March 2020 delivery may be suddenly surplus to requirements, and Day Ahead markets will have to react quickly. The right generation mix will have to be maintained, not only to supply the changing power needs, but to have the capabilities at all times to react to emergencies.”

National Grid has reported that it has segregated its Control Room staff from the rest of its operations and has reported that they are confident that they can maintain grid operations in the event of an internal COVID-19 outbreak.

Nicola Shaw, Executive Director for National Grid in the UK, explained in the system operator’s recent press “We have well-developed procedures in place to manage the effects of a pandemic and National Grid Electricity System Operator has analysed the anticipated effects on electricity supply and demand of mass self-isolation of the UK’s workforce.”

While in the USA, Scott Aaronso at the EEI, which represents US energy suppliers commented in a recent piece for the Telegraph, “We are critical to national and economic security, and to the lives, health, and safety of our customers,” he continued, “That’s a responsibility we take very seriously, and it’s a responsibility that requires planning.”

“We’ve had Y2K, which caused electricity companies to look at how they relied on automated equipment,” he says. “Then we had H1N1, Sars, Mers, and a people-intensive industry realised it might not always have a full workforce, so it learned how to operate in those circumstances.” “the lessons learned from those incidents have laid the bedrock for how we’ll respond today”.

We might hope that some environmental good could come from the chaos, however it appears that YoY CO2 emissions in the UK from electricity generation for March 2020 is on track to be similar to that of March 2019. Although, this is likely to vary in the coming months. Fossil fuel-based power stations may be called to run out of merit order so that they can provide the large-scale flexibility that National Grid will need in order to maintain system balance.

In Ireland, we’ve seen a higher CO2 intensity over the last few days. This tells us that Eirgrid are having to rely on more flexible fossil fuel plant to deal with changing consumption patterns. If wind falls off, it’s hard to tell if this is just the weather or if it is a system issue. We note that wind production in Great Britain remains high over the same time, and Ireland will generally see the same weather fronts.

That said, oil prices are extremely low, meaning uncertainty for the market, whilst the reduction in car and aviation usage have meant CO2 emissions have dropped dramatically in the transport sector, if not specifically energy.

Things large energy users should focus on at the moment to minimise risk to the grid and site operations:

1. National Grid and the ENA will keep everyone up to date with any changes to how they will be operating the system. This includes issues with their control rooms and vital real-time management of the system. Stay tuned to their broadcasts.
2. The patterns of national demand, both in the UK and across Europe, are being closely monitored. Any change to historic patterns which look to become permanent or semi-permanent will have profound effects on grid operations, and these will be communicated to you.
3. GridBeyond are keeping track of any changes announced to National Grid’s procurement of balancing services. We will communicate any changes to the type or volume of services that National Grid requires, and GridBeyond will endeavour to deliver those services as quickly as possible.
4. Lastly, and most importantly, we ask that all consumers providing Demand Side Response services report any changes to their predicted consumption patterns to their DSR Aggregators. This includes any COVID-19 related shutdowns or production changes. Aggregators have a responsibility to keep National Grid up to date about the capabilities of flexible demand on the system. This will be greatly aided with your cooperation.

For more information on how your business could help balance the grid during this time of crisis, or for information on how to implement site resilience strategies, get in touch with the GridBeyond team.