Significant COVID-19 Impact on Power | Chemical and Materials Industry | Data B

Posted by swarajya on April 28th, 2021

COVID-19 Impact on Power in Chemical and Materials Industry


The power sector is considered as the engine or backbone of any economy. Infrastructure of any nation is highly dependent on the power sector as it supplies electricity. Almost in every sector, power is essential for smooth functioning. The importance of power sector has once again popped up in this time of pandemic that the entire world is facing in 2020. For sustained medical services and remote working under lockdown conditions, reliable electricity supply has become critical. The power sector comprises of generation, transmission and distribution. Recently, a shift has been noticed from the use of hydrocarbons to renewables such as wind and solar for generation of electricity. This electricity is then transmitted through lines to highways, international borders and is traded on global market as well. After receiving the electricity in industrial, commercial or residential areas, the distribution network takes over and delivers electricity to the end consumers.

Till 1990s, the power sector and network was owned by a handful of companies (or national agencies). Later, many countries in the world have unbundled their electricity utilities by separating generation, transmission and distribution. This has resulted in more private sector participation in the sector along with increased competition and lowered electricity prices. To ensure fair pricing and promoting renewable energy, conservation and efficiency and to build investor confidence, government has worked on the regulatory front of the sector.

The outbreak of novel coronavirus has affected many sectors of the economy and power sector is among those. Even after being in the category of essential good or service category, the demand for power has seen a decline in the pandemic. This has forced many plants to run on minimum technical load. Even many units of a plant are forced to shut their operations completely. This has reduced the requirement of coal drastically everywhere.

The prevailing lockdown in many countries has resulted in decreased power consumption by 67,000 MW since March 2020. The primary challenge that only power sector faces is that there is no scope of inventory. Units once generated cannot be taken back. In this lockdown, a huge amount of electricity was generated and all of them are represented as lost demand. In addition to this, government has urged the owners to supply power without any interruption even if the payments are not received for the next few months. But this pandemic has presented an opportunity for gas-based power generation to take advantage of the low prices but declined demand has restricted them to take the advantage of this opportunity.  


The pandemic around the globe has drastically reduced the demand for electricity especially in the past few months in both commercial and industrial sectors. According to the International Energy Agency (IEA) in the Q1 of 2020, the global demand for electricity reduced by almost 2.5% and this decline is now forecasted to reach around 5% by the end of this year. In the mid-March and April, IFC has witnessed a decline of average 15% in demand in various countries where it is operational. This decline in demand has also resulted in decline in oil prices. Still volatility is expected due to various other factors that happened much before the outbreak of COVID-19. Natural gas prices reached its lowest before coronavirus due to the economic slowdown in China and record shale gas production in the United States. Spot prices in countries with a large share of renewables have reached levels close to zero marginal cost (for instance, in Brazil, Mexico, Peru and Turkey at certain hours).

Another interesting thing that has come out of the pandemic is that the power generation from renewables has gone up by 3%. This increase is due to the upcoming new solar and wind projects through online channels. Considering the current circumstances, the resiliency provided by renewable power has attracted a lot of attention which has resulted in increased investments in renewables. Now as many economies around the globe are recovering, the growing demand of energy will be met by thermal power plant generation which will increase carbon emissions. If the prices of fossil fuels will remain low, there are chances that renewables could be crowded out especially in regions where the endowments of hydrocarbons are very high. On the other side, the reduced prices of gas has helped in generation of gas-fired power and may reduce the generation of carbon-intensive and coal-fired plants.

The job loss occurred in the pandemic has led to increased unemployment and thus, many people are not in the condition to pay their electricity bills. The delay in Read more…

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Joined: April 7th, 2021
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