Like the rest of the nation, states within PJM continue to see impacts from COVID-19. As statewide shutdowns persist, demand particularly over the morning period has stagnated. Starting as early as March 13, a growing trend began taking place with PJM as restrictions continue to evolve. First, the morning demand peak is occurring later than it usually would, and the morning demand ramp slope (Hours Ending 5 – 8) is about 40% weaker than before COVID impacts began to appear. This can be traced back to a later increase in residential demand during the early morning hours as offices, restaurants, and manufacturing facilities have shuttered. The mass amount of people either not working or working from home has also resulted in them waking up later in the morning, no longer needing to commute.
Figure 1 above illustrates the weaker morning demand ramp, with 2019 and 2016 serving as comparisons to show how much weaker and quicker the slope is to decrease as we head deeper into the shoulder season. The usual decrease is due to shedding lingering heating demand and also seeing a decrease in lighting load during the morning hours as sunrise times shift earlier, though coronavirus responses amplified the typical downward trend.
The morning ramp is not the only time of the day to show a decrease in demand, as weakness carries through the daytime and evening hours as well, mainly due to commercial and industrial load weakness relative to normal levels.
The above chart estimates the on-peak average (OPA) demand as well as the percent decrease in load due to the coronavirus impacts. While our estimates are routinely less than the PJM estimates, our confidence is high due to a meticulous method based on historical weather days as opposed to the “simple model” PJM claims they have created for this event. While not shown in the graphic above, the PJM ISO estimates were vastly over-estimating demand levels even before coronavirus impacts were evident across the region, likely due to the significantly warmer weather this year than the weather during years they based the model off of (2017-2019).
COVID-19 has not just altered typical demand patterns, but maintenance and refuels for generators have also been impacted. Looking at a comparison of this year to last year, total generation outages are well below where we were in the beginning of April, about 17 GW worth.
Generation outages were already trending below last years before COVID-19 impacts, as you can see in figure 4. The larger separation can be seen around March 22, as cases began to skyrocket and additional restrictions were imposed. The gray and orange lines are comparing the forecasted planned outages and actual planned outages (total generation outages = planned + maintenance + forced, although PJM only forecasted planned outages longer term). Beginning March 22, new planned generation outages had stagnated, making the total amount of generation on outage well below forecast and even beginning to decline. Normally, generation outages are steadily increasing at this time of year.
Forward looking, there is potential that rather than generation outages being fully cancelled, they may be delayed into May or June. This could result in a slow decline in outages and more generation on outage going into the summer months. It is currently reflected in PJM’s planned generation outage forecast when comparing it to the beginning of spring. Currently, generation outages are trending well below last year, making PJM’s supply stack unprecedentedly healthy for the shoulder season. This, combined with weaker load on the demand side, is contributing to some of the cheapest energy prices seen in PJM history.
Looking at it by hour, every single hour in March this year has been weaker. The demand peaks in particular have been hit hard, with Hour Ending seven averaging almost $30 less in 2020 than it did in 2019.
Gas prices continue to be weaker this year as well, with Henry Hub averaging $1.91 last year and $1.75 this year. Eastern basis saw a bigger dip with Tetco M3 dropping from $1.92 to $1.47. Looking at average hourly heat rates using Henry Hub (HH), the impacts to the morning demand ramp are very apparent.
Hours ending 5-8 saw the biggest drop in heat rates in March, with the rest of the day holding steady (or increasing) with last year.
This trend has carried into the first 20 days of April as well. Every hour has seen much weaker system energy prices. This gap is closed significantly when factoring in the lower gas prices by comparing heat rates. Like March, the morning ramp in April lags behind 2019 by a substantial margin, as shown in figures 7 and 8 below.
As this pandemic continues to unfold, its impact on demand, generation, and the resulting price implications will continue to be monitored as the shoulder season heads towards the summer. Our team of analysts are providing real-time insight when our clients need it the most. To learn more about our services or to speak with an expert, please click here.