Global power demand to drop big in 2020
Mike Zaccardi, CFA, CMT
COVID-19 continues to linger in the United States. Particularly across many of the southern and western states. Bank of America Merrill Lynch Global Research shows that Arizona, Texas, Florida, California, South Carolina, Georgia, Utah, Oklahoma and Nevada are among the ‘new hot spots’. Those nine states have seen daily new cases surge from a combined 5,000 on Memorial Day weekend to 20,000 recently (7-day moving average data).
Meanwhile, the ‘old hot spots’ of New York, New Jersey, Connecticut, Massachusetts, and Washington peaked on April 10 with 16,000 daily new cases. Those five states have seen a steady drop to about 1,200 new cases each day.
Perhaps as COVID-19 spread from China to Europe to many major US densely populated areas over the course of the first wave, it is now finally hitting other regions of the US. It’s not a second wave, rather a continuation of the first.
It remains to be seen if there will be a slew of new economic shutdown measures.
For the utility sector, the pandemic has and will result in a big hit to global energy demand. The International Energy Agency (IEA) predicts a 6% decline in 2020 usage. Power demand is expected to fall just 5% from 2019, however. Drops of these magnitudes would be the biggest in 70 years, notes the IEA. For power demand losses around the world in 2020 versus last year, it may be the biggest drop since the Great Depression.
Fossil fuels are expected to be hit the hardest as renewable generation continues to generally grow in the fuel mix. Coal is expected to see sharp declines while some nuclear losses are also expected. Low natural gas prices will result in still robust gas demand. In fact, the US may hit record power burn figures during July given the lowest spot prices since 1995.
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Chart source: Bank of America Merrill Lynch Global Research