Power Sector Demand Destruction Forces Hard ChoicesJuly 2020 - Teri Viswanath
- While the long-term impacts of COVID-19 on the power sector remain unclear, belt tightening is a must and the industry has an opportunity now to adapt.
- Traditional prescriptive remedies for suppliers – namely, accelerated load recovery, higher wholesale power prices, or rate relief – might not emerge fast enough, suggesting tougher choices are ahead.
- Recent load recovery appears short-lived, with demand unlikely to revisit pre-pandemic levels until 2022 at the earliest. The longer this road to recovery, the greater the likelihood of structural accommodation.
- Coal generation has borne most of these demand losses, possibly fast-forwarding what would have otherwise been a decade-long cycle of energy transition in the U.S. dispatch stack.
- In the very near-term, utilities are likely to delay reinvestment, rely on capital markets to meet liquidity needs, and stretch the cost to rate payers over several decades.
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