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Power Demand Coming Back in China After Unprecedented Drop During COVID-19 Lockdown

Power Demand Coming Back in China After Unprecedented Drop During COVID-19 Lockdown

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“Home Isolation” Surge Partly Compensated for Big Industrial Decline

  • The first nation to implement a COVID-19 lockdown, China has experienced an unprecedented power demand drop during the first two months of the year as a result of the stagnation of industrial and commercial activities. Electricity consumption declined 7.8% year on year during January and February, a sharper drop even compared to the 2008-09 Great Recession.
  • The industrial sector which accounts for two thirds of China’s electricity consumption led the demand drop, recording a 12% decrease in power consumption. This is especially evident in sectors that are labor intensive as workers remained homebound for weeks; the textiles industry, for example, registered a 30% drop in electricity usage during the first two months.
  • The commercial and service sector saw demand decrease by 3.1% during the first two months of the year. However, home isolation policies drove an increase in technology usage that led electricity demand from the telecom and webservice sector to increase by 27%. Residential electricity demand also increased by 2.4% as people stayed home.

“While hotels and restaurants shuttered, electricity demand from the telecom and webservice sector increased 27% as home isolation policies drove up usage of technology such as mobile applications, internet and TV. We will likely see similar trends in other countries as lockdown policies expand.” – Xizhou Zhou, vice president and managing director of global power & renewables, IHS Markit

  • IHS Markit expects power demand growth to return to positive for the rest of the year as China returns to work. As of mid-March, many sectors and businesses have reopened, including more than 90% of markets, shops and malls and over 70% of small- and medium-sized business. Halted infrastructure projects have also restarted as workers returned – for example, China Railway reported that 108 major projects have resumed work, or 93% of its current construction projects. As a result, the country’s power demand has already started to show year-on-year growth in March in terms of both average load and peak load.
  • But as the rest of the world head into recession, China will also be impacted. As a result, we expect GDP to grow 3.9% (compared with our pre-COVID-19 outlook of 5.4%), leading power demand to grow by only 2.8%; this compares with an average annual growth of 7% during the decade before.
  • The lower demand is creating more competition among the different generation sources in the country. One notable difference in China’s power system between the Great Recession and the current COVID-19 downturn is the share of renewables; solar and wind accounted for less than 2% of China’s power fleet a decade ago, but now they represent more than 20% of installed capacity.
  • Renewables have remained very resilient during the first two months of national lockdown and power demand drop. While thermal power generation dropped 9% year-on-year in January and February, wind generation increased by 1% and solar generation increased by 12%. This trend will likely continue.

 


“Priority dispatch for renewables allowed for growth while overall power demand declined. We believe this trend will continue.”– Xizhou Zhou, vice president and managing director of global power & renewables, IHS Markit

Source: ihsmarkit
Anand Gupta Editor - EQ Int'l Media Network

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