ANALYSIS: Power demand ticking up in US markets as coronavirus pandemic restrictions ease

US power loads are expected to slowly recover over the summer and into the shoulder season as states gradually reopen businesses and put more demand on the system, but that trend certainly could change if there is a second wave of the virus later this year.

The slow recovery is expected to bring power markets back to pre-coronavirus levels by late 2020 or early 2021, said Manan Ahuja, S&P Global Platts Analytics North American manager. However, expectations change weekly as more data is collected and analyzed.

"It certainly looks that as the temperature goes up, the load impact from the virus won't be as much of a factor," said Morris Greenberg, S&P Global Platts North American power analytics senior manager.

The typical summer heat will take over what drives power load. Residential load is weather sensitive and the effect of higher temperatures is elasticity, Ahuja said.

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VIRUS IMPACT

As stay-home orders swept the country, shutting down business and schools, power load plunged from the sudden drop in commercial demand, despite the uptick in residential load. With less demand, came a drop in prices.

California was the first state to issue a stay-home order May 20 to slow the spread of the virus, but New York has been hardest hit, with NYISO Zone J NYC on-peak day-ahead locational marginal prices down 49% in May compared to the three-year May average, according to New York Independent System Operator data. New York State began the process of phased reopening on May 15, but New York City, which has had more than 202,800 cases and more than 17,000 deaths from the virus, will not even begin to reopen the city until June 8.

South Carolina was the last state to initiate a stay-home order April 7, even as many states extended end dates throughout April and May as they tracked the spread of the disease. Montana was first state to start the reopening process. Hawaii will be the last state to end its stay-home order on June 30.

NORTHEAST EXPECTATIONS

Impacts to electricity demand in the Northeast in May were in the 10% to 16% range depending on the region and timing of the estimates. However, most areas are beginning to exhibit signs of recovery, Platts Analytics said in a research note.

Weather adjusted total New York state loads are now about 10% below predicted values given recent weather, which is an uptick from the lows of around 16% in mid-May, according to Platts Analytics.

The decreased power demand in recent months has pushed down prices in the New York City area by 45% compared to 2019, according to ISO data. Average real-time NYISO Zone J prices from March to May 2019 were $27.95/MWh compared to $15.33/MWh from March to May 25, 2020.

Looking into the summer, analysts anticipate sub $2/MMBtu natural gas and recovering (but still weaker) demand will keep Northeast power prices in the $20-30/MWh range, while driving gas-fired generation notably higher year-over-year.

NYISO forecasts peakload to reach 32,296 MW this summer, a decrease of 86 MW from the 2019 baseline forecast and 1.3% above the 10-year average peak of 31,867 MW, the grid operator said in a statement.

For 90th percentile heat wave conditions, or once in a decade, NYISO is projecting a small capacity shortfall of 193 MW, "but we believe that can easily be made up by our energy markets," Wes Yeomans, NYISO vice president of operations, said during a conference call with reporters.

While the coronavirus pandemic has led to an 8% to 10% drop in overall power usage throughout the New York Control Area, "the virus has not materially impacted our summer peak load projections," NYISO said.

That is because "we believe most or all of the state's air conditioners will come on" and it's hard to know where the state will be in the economic reopening process by July or August, Yeomans said.

CAL-ISO EXPECTATIONS

In its 2020 summer assessment report, the California ISO projected system capacity at 48,012 MW in June, 48,555 MW in July, 46,903 MW in August and 44,543 MW in September. In comparison, ISO peakload averaged about 31,375 MW last June, 36,225 last July, 38,700 MW last August and 35,050 MW last August. Cal-ISO's all-time peakload record is 50,270 MW reached in July 2006.

Natural gas resources account for roughly 60% of the grid operator's maximum available peak capacity, followed by hydropower at 16% and solar at 9%, according to the report. Last summer, thermal generation accounted for 26% of the market share, followed by almost 23% in imports, nearly 15% hydro and more than 15% solar, according to ISO data. So far this year, thermal has made up more than 28% of the mix, followed by 26% imports, more than 8% hydro and about 14% solar.

ISO power prices have been down significantly this year on uncertainty surrounding the coronavirus and increased renewables curtailments, which record of 318,444 MW in April.

SP15 on-peak June averaged 34% lower than its 2019 counterpart in its last month of trading, according to S&P Global Platts data. On-peak July is in the low $40s/MWh, 32% lower than the 2019 package a year ago, with on-peak August trading 33% lower in the mid-$40s/MWh. The on-peak September package is trading in the low $40s/MWh, 20% lower than its 2019 counterpart a year ago.