The current global pandemic has been the great disrupter of global electricity markets, according to the world’s energy watchdog. International Energy Agency (IEA) analysis across more than 30 countries reveals that every month of lockdown reduced national electricity demand by an average of 20%, requiring countries to roll out a quick and effective plan to combat COVID-19’s disruption on energy markets.
every month of lockdown reduced national electricity demand by 20%
The compound impact of that demand shock will lead to a 5% fall in global electricity demand in 2020. Yet at the same time as factories and offices sat empty, household electricity demand has surged across the world. With schools and businesses closed, home devices like computers and televisions remain switched on longer than usual. Surging residential bills across the world sparked global distress, with consumers calling on utilities and governments to implement supportive measures.
Falling demand a challenge for operators
These global trends represent a perfect storm for regulators and operators. Commercial demand is falling, leading to significant revenue reductions. At the same time, residential consumption is rapidly rising, leaving low-income household groups in particular vulnerable to higher electricity bills at a time when incomes are themselves challenged.
Energy Watch analysis of data from severely impacted countries in Europe — Italy, United Kingdom — compared against those of Southeast Asian nations — Malaysia, Singapore, Thailand — reveals a diverse picture of policy and action.
Italy and the United Kingdom, both countries facing the harshest brunt of COVID-19, witnessed significant lows in overall electricity demand. Stark falls in the UK reached almost 25% below business-as-usual levels, and by almost 30% in Italy, showing the reality of lockdown on commercial demand in particular.
This raises concerns for the sustainability of industry revenue
This raises concerns for the sustainability of industry revenue, and the knock-on impact to the electricity supply ecosystem. As revenue falls, it puts significant strain on budgets for vital infrastructure such as smart grid investment, expansion of rural electrification programmes, and even the most fundamental commitment to maintain vital grid infrastructure.
Concerns about the impact on industry stability led Italy to announce a €1.5 billion ‘COVID account’, to guarantee the financial stability of energy retailing companies. Retailers who can demonstrate severe revenue impact, particularly around unpaid bills, could apply for a slice of this support to maintain their own finances over this period.
Countries are responding to reduce citizens’ bills
Perhaps the most pressing concern for national decision makers is the dual impact of reduced income at a time of rising domestic bills. Both the nations’ lockdowns come at a time where energy bills traditionally would rise, as warmer weather leads to an increase in air conditioning use. In Singapore, the hotter weather and COVID-19 lockdown period both combined to result in a 22% increase in daily household electricity consumption. Malaysia similarly saw a 23% increase in residential usage.
The domestic demand surge is a particular challenge for low-income groups living hand-to-mouth from daily wage earnings.
“These workers, what they earn today, becomes the model for tomorrow….these people do not have huge amount of savings. That means when lockdowns started they can’t carry out business as usual, and they exhausted their savings within days,” said Ravinesh Uthayasuriyan, Federation of Malaysian Consumers (FOMCA), speaking to Energy Watch recently.
It is difficult to compare individual cost impacts for global electricity consumers during coronavirus, but there are clear indicators to understand the pressures that domestic consumers face.
In the UK, energy use is tied to both gas and electricity consumption for heating, cooking, and home power needs. Homes have typically seen a surge in electricity and gas use which will result in bills 37% higher than usual thanks to the coronavirus lockdown, according to industry comparison platform Compare the Market. That rise equates to an average increase of £32.31 a month or £387 (US$480) over the course of a year. This comes at a time when 11% of respondents to a UK Office of National Statistics’ (ONS) survey noted it was ‘difficult or very difficult’ to pay the usual household bills.
The challenge of actual versus predicted billing offers another area of concern in some countries. In Malaysia and Thailand, where smart meters have not yet reached widespread adoption, residential consumers are faced with potentially higher bills as lockdowns end and domestic meter readings resume. In Singapore, estimates are based off 300,000 households that already operate smart metering infrastructure.
“It is proven that a smart meters will empower people to save energy. Because prior to this people have to wait for electricity bills at the end of the month. You don’t know where you spent it, how you spent it, or whatsoever,” said Ravinesh Uthayasuriyan, highlighting how smart meters have unlocked a valuable benefit of informed electricity usage during periods of domestic lockdown.
Action to address the challenges
At this time of global crisis, governments are tasked with the ultimate responsibility to support society. Stimulus packages have injected billions of dollars into global economies, with electricity and utility tariffs being a key focus for some nations.
While nations in Southeast Asia such as Thailand, Malaysia, and Singapore have taken a more direct approach to financial relief, the UK and Italy have by-and-large focused on broader policy decisions without targeted support to meet utility bill payments.l countries analysed, the financial support noted in Italy and UK diverged significantly from that of Southeast Asian countries.
In the UK, operators have been encouraged to adopt a set of principles that offer a more flexible approach to bill payments, but with no mandated financial support. Italy offers a social support fund to support utility payments in its most vulnerable citizens, with the likelihood that the economic impact of COVID-19 could see more citizens eligible for this existing support. Malaysia, Singapore, and Thailand have all introduced more comprehensive measures to support domestic consumers.
Malaysia’s support has been introduced in multiple stages. In its initial announcement, the Malaysian Government allocated RM500 million (~US$115 million) to provide a 15% discount on electricity bills for the ravaged tourism sector, as well as 2% for commercial, industrial, agricultural and household sectors in Peninsular Malaysia beginning 1 April 2020. This stimulus was quickly enhanced as the Government together with Tenaga Nasional Berhad increased the allocation by RM530 million (~US$123 million) to introduce a tiered-discount with rates ranging from 15%-50% discount over six months. The Bantuan Prihatin Elektrik support will see domestic customers receive up the first 300kWh of electricity free during the months of April, May, and June, as well as additional discounts for higher consumption.
Thailand has followed a similar approach, announcing in April that 22 million households would benefit from bill reductions from March to May. Free electricity usage has been extended from households consuming up to 150kWh, from 90kWh previously. Payments between 150kWh to 800kWh will be charged at the same as February bills, with any usage over 800kWh receiving a 50% discount. Large residential consumers over 3,000kWh will receive a 30% discount.
In Singapore, targeted support was announced in the nation’s Fortitude Budget, with each household with at least one Singaporean citizen receiving a one-off S$100 Solidarity Utilities Credit for doing their part in staying home during the circuit breaker period. The Government also later announced that households would receive double the value of their GST Voucher, a utility bill rebate for low and middle-income households, in 2020.
Challenges in the path ahead
Nations across the world share a common challenge in electricity demand during the time of coronavirus. Domestic demand has risen rapidly, leading to higher household bills, while commercial demand has fallen precipitously, creating unique challenges for industry revenue.
Government support in Southeast Asia has offered a more focused, people-centric approach that delivers direct discounts for consumers. In European power markets, governments seem more keen to encourage a flexible approach to bill repayment, rather than mandated reductions or cash handouts.
While the ultimate benefits of these approaches remain to be judged, it’s clear that targeted financial support offers a more immediate relief to households in affected countries. It’s also clear that electricity ecosystem operators in these countries face a challenging period ahead, and supporting the sustainability of ongoing operations will be another key concern for decision makers. The most immediate priority remains the affordability of tariffs for consumers, and in that, Southeast Asia seems to be taking the lead.