Effect of the Covid-19 response on energy demand

The immediate impact of COVID-19 on businesses has been profound and the medium to long term effects are unknown. For many organisations, their first priority is survival; with that achieved they are working out how to thrive in this new landscape, a landscape that offers opportunities to set a path towards achieving energy efficiency.

Measures to contain the spread of COVID-19 such as stay-home orders and wide-spread closures of non-essential businesses resulted in massive changes to electricity demand trends. At the height of lockdown, up to a 10% reduction in average hourly consumption was seen in North America[1] in the UK this was up to 20%[2]; consumption has recovered to almost normal levels in both regions by summer.

The impacts were more profound in some markets than others. As expected, the commercial sector exhibited the largest load reduction, data from Canada shows loads reduced between 25 – 50% depending on the sector[3]. While data from June shows signs of load recovery, coinciding with the easing of COVID-19 restrictions, there is still significant uncertainty around the prolonged impacts of COVID-19 on electricity load trends while the nature of the economic recovery unfolds.

Business impact

A recent McKinsey Report states: “The effect of the COVID-19 crisis on SME performance across the United Kingdom is immense. Of surveyed SMEs, 80% report stable or growing revenue for the year before the pandemic began. Today, 80% of SMEs say their revenues are declining. They also report several related effects:

• concern about defaulting on loans (one in four)
• concern about their ability to retain employees (24%) and doubt in their ability to sustain their supply chains (28%)
• expectations of reducing headcount in the aftermath of the pandemic (28%) and postponing growth projects (36 %)”[4]

Predictions are that small businesses will take up to five years to recover[5]; what will they look like after that recovery? And how will that recovery look within the context of the Climate Emergency.

Lockdown has provided many owners and managers the time to assess the way they run their organisations and reflect on how they want to go forward into an uncertain future from an uncertain present.

Understanding where they are today

Organisations with the ability to remotely monitor their energy consumption have been able to observe how much their sites are consuming when they aren’t operational. Sometimes what they’ve learned has been surprising, for example a gym within one of our pilot sites neglected to turn their systems off pre-lockdown found their energy bills went up, despite being empty. The root cause? No bodies in the room = no heat generated by their customers’ workouts = much higher heating bills for an empty space.

For smaller businesses with no energy monitoring solutions, this remote observation has been impossible and identifies one of the things that all businesses need in future – a way to manage their energy at all times.

A changing operating environment

The way businesses operate had already started changing; we look at a few different sectors here – all sectors in which the EnergyIQ solution is being trialled.

Hospitality: In the hospitality sector restaurants had opened kitchens in warehouse space or shipping containers to support home delivery services; at time it felts as if the only traffic on the streets in London at the height of lockdown was home delivery riders.

Retail: Significant change was already underway in retail: for example, in the UK banking sector, one third of branches have closed since 2015 and those that remain could look very different in future[6]. Sector innovators are exploring entirely different roles for their physical branches: Halifax’s central London branch offers a coffee shop, event space and areas to explore children’s savings and travel products. Virgin Money say they are changing the language of banking, “We don’t refer to them as bank branches. They’re Virgin Money Stores,” says Louise Hodges, head of consumer communications at Virgin Money.

Retail’s shift to online has been accelerated by lockdown, 40% of June retail sales in the UK were online. Changed working practices mean we will physically shop in different locations and PWC see opportunities whereby local retailers will benefit from increased working from home as they will then also shop locally. That shift (if it becomes permanent) will be detrimental to retail in urban centres. Wins in one area are likely to be losses elsewhere[7].

Working from home: COVID-19 safety measures meant that the vast majority of office workers who were not furloughed worked from home. That dramatic shift is only just starting to be understood in terms of the implications to businesses; will people want to continue to work from home, or go to a local ‘hot desking’ environment (funded by their employer) to keep the barrier between work and home life, or will office life and commuting go back to normal? John Lewis reported a 44% increase in desk sales and 91% increase in office chairs in May[8] – where people finally end up working, and for how much of their week, is still an unknown.

Whatever happens, lower energy consumption in a central office won’t mean lower net consumption.

Businesses thinking about where they want to be tomorrow

Climate change and the question of how to address it was already an issue for businesses; nearly two thirds of UK chief executives believe that climate change presents a threat to their business, with 25 per cent saying they are “extremely concerned” about the issue[9].

During lockdown proactive businesses have been taking the opportunity to explore what they can do to become more energy efficient; organisations that deliver energy efficiency services report up to double their normal enquiry levels during the last few months.

Businesses also recognise they need more resiliency; future thinking businesses are exploring demand flexibility as a mechanism to unlock incremental and quick capacities (compared to traditional generation and wires & poles investments – which came to a halt during COVID-19). There is a natural increased interest in automation and remote control to support energy efficiency and smarter consumption, new technological energy management solutions like EnergyIQ offer opportunities to take advantage of optimising supply and making that supply secure.

What next?

2019 was the year Climate change became mainstream[10]; 2020 is the year of Covid-19. Businesses looking at COVID-19 recovery as an opportunity to shape a more efficient energy future are exploring tools like EnergyIQ to help them go far beyond just remotely monitoring their energy; their goal is to transform the way they consumer energy to become truly energy efficient.

Government stimulus programmes will play a key role in supporting a clean recovery; we look forward to seeing what the British[11] and Canadian governments do to support businesses survive, thrive and build their resilience despite the challenges wrought by Covid-19.

[1] Brattle Group Analysis

[2] https://www.nationalgrid.com/uk/stories/grid-at-work-stories/4-ways-lockdown-life-affected-uk-electricity-use

[3] IESO market update

[4] McKinsey, 16 June 2020,  How the COVID-19 crisis is affecting UK small and medium-size enterprises, https://www.mckinsey.com/industries/public-sector/our-insights/how-the-covid-19-crisis-is-affecting-uk-small-and-medium-size-enterprises#

[5] McKinsey, 7 July 2020, US small business recovery after the Covid-19 crisis, https://www.mckinsey.com/industries/public-sector/our-insights/us-small-business-recovery-after-the-covid-19-crisis

[6] Financial Times, 14 March 2020 ‘How your high street bank branch could evolve’

[7] PWC, The return of retail, what will we see: https://www.pwc.co.uk/issues/crisis-and-resilience/covid-19/the-return-of-retail–what-will-we-see-.html

[8] FT.com, Design feature, June 6/7 2020

[9] 3City AM, 20 January 2020, PWC Survey https://www.cityam.com/climate-change-major-concern-for-uk-businesses-executives-say/

[10] Deloitte, 12 December 2019, Companies are under pressure on climate change and need to do more, https://www2.deloitte.com/us/en/insights/topics/strategy/impact-and-opportunities-of-climate-change-on-business.html

[11] https://www.theguardian.com/environment/2020/jul/21/legal-challenge-against-uk-government-green-recovery-plans