The coronavirus (COVID-19) pandemic has profoundly changed fundamental aspects of our daily lives. Many of us are working – and kids are studying – from home. At the same time, many services and businesses – for example, restaurants, shops, gyms, libraries - have had to close their doors, at least temporarily. So what is the cumulative impact of all these changes on electricity supply across the National Electricity Market (NEM)?
The supply and demand characteristics of the NEM are extremely dynamic. Unlike markets for other goods and services that operate and fluctuate on a longer-term basis, the supply and demand of electricity across the entire NEM must always balance instantaneously. If there is a break in electricity supply, this can lead to load-shedding or blackouts.
With people at home and already experiencing a lot of change and challenges as a result of the impacts from COVID-19, it is more important than ever that a secure and reliable supply of electricity is maintained.
Reliable supply of electricity
The good news is that there is sufficient available generation available in the NEM at the moment. Typically, infrastructure in the NEM (generators and network poles and wires) is designed to meet peak demand, which in Australia generally occurs on very hot weekdays in summer – because of the amount of air-conditioning which is added at these times to the usual heavy weekday load.
The chart below shows that not only is there enough capacity (ie generation) available in the NEM to meet peak demand, but demand recently (as shown by the orange bar for a seven-day period in April) has been much lower than the peak demand conditions that the NEM can handle.
Source: NEM data, FY15 – FY20 and NEM data 13-20 Apr 2020
As it stands, there should be ample generation available to power the NEM throughout 2020 and, just like every year, AGL and other NEM generators will work with the market operator AEMO to prepare to meet peak demand for next summer.
Changes to underlying demand
As the earlier chart above highlights, overall NEM daily peak demand has been sitting at around 25 GW. That demand is well within the normal range that NEM generation is accustomed to delivering during periods of mild autumn weather. Similarly, overall NEM consumption (the total amount of electricity used per day) has also remained fairly steady over the last month.
Source: NEM data, 4 Mar – 18 Apr 2020
The above chart indicates a small reduction in average NEM consumption throughout March and April. Overall, electricity system demand is marginally reduced but stable, and across the states we have broadly seen a decline of around 5% for March and April.
As consumption is highly dependent on weather, we need to correct for these variables before making any conclusions as to impacts from COVID-19. Weather normalised data suggests that demand has only marginally decreased, around 2-3% less than last year. This contrasts to the experience of other international energy markets, which have seen much larger demand reductions.
What is driving demand?
The key difference with international markets has been Australia maintaining much of its heavy industry, which is responsible for a significant proportion of overall NEM demand.
If we break it down by customer segment, we do see some larger expected movements in commercial demand. There are significant declines in retail, and food and beverage customers; however, there is little observable impact on the manufacturing, mining, and communications sectors.
While it is clear that the impact of COVID-19 restrictions are flowing through to some sectors more than others, even within those sectors there are variances in demand patterns. The relative stability in overall demand patterns does not reflect potentially large variances at a customer level. These individual impacts are likely to be specific to customer circumstances, rather than system-wide, so where those big variances occur – eg with large industrial customers – we are focusing on understanding and responding to these customer needs.
While increased electricity use from household appliances such as lights, televisions, and computers are likely to have had some impact on these increases, the most significant driver of increased use is likely to be increases from heating appliances, especially in colder southern states. While we are moving into the colder months, we’re also generally spending much more time at home – so we’re using our heaters for longer periods. We will continue to monitor these impacts as winter approaches and seasonal demand changes.
As well as demand increases, we are aware that for some customers they will also be experiencing more difficulty in managing bills as a result of a loss of income or financial stress because of COVID-19. This is where measures like AGL’s app and the Energy Insights service can help customers to monitor their energy consumption, understand what’s driving their energy usage, and help them to reduce their bills.
AGL is working hard to support these customers through a number of additional measures, in particular the COVID-19 Customer Support Program. You can find out more here:
Risk management on site
While there is sufficient generation available in the NEM, there remains the risk that measures to prevent the spread of COVID-19 may impact the way that key people who manage generation can work. Working remotely for many operational roles on critical infrastructure is simply not an option. There is also a range of specialised skills required to keep complex machinery working safely and smoothly, and these skills can only be performed by a limited number of experienced and highly trained people.
To mitigate these risks, AGL has site-specific business continuity plans and controls in place, and all non-critical workers have been asked to work from home.
We’ve restricted access to site, segregated our workforce, introduced new rostering systems and implemented additional cleaning and hygiene measures. At our major sites, health screening processes and services are available, including body temperature checking at our largest sites. We also have plans in place if things were to escalate. AEMO is also working with the energy industry – including electricity generators, gas facilities, network businesses and other market participants – to support additional pandemic management actions across the sector.
All market participants are taking steps to ensure preparations are in place to manage every possible contingency across the NEM. To help support the grid during this time, the Australian Competition and Consumer Commission has granted interim authorisation to AEMO to allow energy market participants to cooperate on certain measures, including sharing information on critical sites, maintenance, and resources. This special cooperation is intended to maintain secure and reliable energy supplies for the duration of the pandemic.
Other issues for AGL to investigate
While the impacts on overall NEM demand and reliability appear at this stage to be slight, there are many issues that are affecting the energy industry, including the ongoing impacts on commercial and industrial customers, the impacts of sudden or continuing financial hardship on customers due to loss of income or increase in household consumption, the impact on installations of household solar and battery systems, and changes to gas demand leading into periods of colder weather. While there will be system-wide impacts, many impacts are likely to be specific to customer circumstances, so increased effort is required to understand the impacts on customers so we can respond to their concerns.
We will continue to share our insights on these issues as we can, and we are committed to supporting our people, customers and the communities in which we operate during this challenging time.