COVID-19 not seen as a big summer factor for NY
Mike Zaccardi, CFA, CMT
The New York Independent System Operator (NYISO) expects to have enough reserves to meet peak demand this summer. There is a lot to unpack in that statement, so let’s dig deeper.
New York state has obviously been ravaged by COVID-19 impacts, but the ISO said the virus will not lead to a big drop in peak demand figures this summer. Peak demand is a term that describes the highest 1-hour load during the season. Most regional power markets are ‘summer-peaking’, meaning their highest demand period of the year is June-July-August due to very strong cooling load.
NYISO reports that COVID-19 caused an 8-10% drop in overall electricity usage in the state. Earlier this month, the Texas market (ERCOT) reduced their peak demand outlook rather notably. My take is that nobody really has a firm grasp of how power demand will ultimately shake out in the coming months.
While states are re-opening, businesses are shy about taking steps that are too aggressive while consumers are playing it safe by staying at home most of the time. Still others are disregarding orders, and doing as they please. So it is almost irrelevant what the ‘official’ orders and guidance from the states are. The recovery will be gradual.
What do we have more confidence in? The weather. Believe it or not. The market expects a hotter than usual summer across the nation for a variety of factors. The first half of June is shaping up to fit that forecast. Earlier this week parts of New England and Quebec experienced their own record-breaking heat.
Hot temps are going to drive cooling load whether we are at house working from home or in the office. The good news is wholesale commodity and power prices are very low, so while demand may spike here and there, the impacts should not be too drastic.
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For more, read from NY-ISO here.