The impact of the COVID-19 on Energy Industry

COVID-19 has been an absolutely unpredictable, wild stir of events that has negatively affected nearly everyone’s lives outside of just health concerns. There have been an unfathomable amount of externalities alongside the spread of this disease that has changed the way industries and people function, especially in the field of energy. COVID-19 has had a dramatic effect on the energy industry that has not only damaged the way we function in regards to energy now, but will continue to persist for years and years to come.

To begin, this past year of national energy consumption has been different than ever before, and it will not go back to normal anytime soon. In general, power consumption declined a significant amount as a direct response to COVID’s impact on this industry. According to Forbes.com, “the commercial sector dropped 11% year-over-year consuming about 35 billion fewer kWhs.” This decline is almost entirely due to the large reduction of visitors in stores and retail establishments. When stores are not legally allowed to be open and serve the public, it is inevitable that the commercial sector will struggle, and the usage of energy on a daily basis will obviously take a big dip. The industrial sector was also damaged by this virus as the total energy consumption dropped 9%. The total global economy essentially crashed, leaving millions world-wide without a job simply because companies were not generating enough revenue to keep their entire staff. As companies were not producing at their previous levels, their energy usage decreased and is still decreasing. On the contrary, there are increases in the residential sector (8%) and for power usage in hospitals (600%) as well. In terms of what types of energy were used to power our country, natural gas (40%) and renewable energy (23%) were used more than any other source nationally. In total, due to decreases in some industries of power consumption and increases in the others, there has been a net loss of 4%, which although seems relatively small, has been an immense change in the way the globe currently functions. However, as we begin to open up our economy more and more, energy consumption in the industrial and commercial sectors will increase, and hopefully hospitals will not have to use such an abundance of energy as this pandemic slowly begins to go away.

On a long-term scale, COVID-19 has brought many side effects besides just the virus that will take a significant amount of time to undo before we can go back to life as we know it prior to this pandemic. Within the last year, we have seen a 4% decrease in total energy consumption, largely due to a major shift of working at home, less travelling, a dramatic shift to online shopping, and retail stores closing due to legal restrictions and lack of customers. Studies show that these factors that have contributed to a decline in energy consumption will not go back to “normal” anytime soon within the next five years or so. According to S&P Global, “The report projects that by the end of 2025, COVID-19 will have decreased annual power demand by 4 TWh to 47 TWh in offices, by 11 to 193 TWh in the retail sector and between zero to 33 TWh in the hospitality sector.” There is one overall trend that can be seen across nearly all sectors of our economy within the next five years: demand in energy will continue to decrease. The retail sector is expected to suffer dramatically more than offices and hospitality sectors, largely because the pandemic has changed the way things are bought and sold, which is nearly entirely online. In total, the long-term annual electricity demand is expected to have a net loss of over 150 TWh of annual consumption.

I believe that there are too much unknown and too many confounding variables that go alongside the presence COVID-19 to predict energy usage too far into the future (beyond 10 years). The state of the economy and energy usage has a direct relationship, so if our economy continues to increase and hopefully brings our nation back to pre-COVID times, energy consumption could also increase on a long-term basis. Nonetheless, if our economy fails to overcome this setback, energy usage will keep declining for years and years to come, and will continue to negatively impact the lives of many in a countless amount of ways.