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The impact of COVID-19 on electric utilities

Mukul Sarkar

The COVID-19 pandemic is the largest global health crisis of our time. It has led to a dramatic loss of human life and affected millions of people worldwide. But the pandemic is much more than a health crisis; the economic and social disruption caused by the pandemic is truly devastating. It has impacted almost every industry sector – be it retail, automotive, or utilities.

In this article, we focus on the impact of the pandemic on the operations of electric utilities. We know from experience that even during economic slowdown, utilities in general generate stable revenues. But in the first quarter of 2020 when the pandemic broke out, industrial activities were decreased, non-essential commercial activities almost stopped, and all means of transport were put on hold. This significantly impacted different sections of the utilities business. The effect on utilities can be considered from three angles: decrease in demand, worker safety, and the need for digital transformation.

  • Decrease in power demand

Demand represents the amount of electrical power that has to be delivered at any given time to meet customer needs. Decreased industrial and commercial activity is a major contributor to the fall in demand. Railways and airports are major consumers and lockdowns have had a significant impact on demand. The decline in demand has resulted in a decrease in overall revenue for utilities.

Utility companies have suffered a mixed impact due to tariff structures as well. Electricity suppliers purchase electricity from the wholesale market or through long- or medium-term bilateral agreements with generating plants. Purchasing rates remain the same for all categories of customers, but in general, in many countries the tariffs for domestic consumption are higher than those for commercial or industrial use. During lockdown, domestic consumption increased, and commercial and industrial consumption decreased, meaning that utilities had additional revenue from domestic use. But in other countries, where the average domestic tariff is lower than commercial and industrial tariffs, suppliers lost additional revenue due to the prevailing tariff structure.

Lower energy demand, combined with a worsening financial situation for many utilities has prevented many suppliers from purchasing energy from wind and solar plants as it involves prompt payment to renewable energy generators. As a result, the renewable power sector has been impacted by COVID as well.

  • Worker safety and operational constraints

Due to restrictions on the movement of people, many areas were completely cut off. As a result, the meter-to-cash process has faced huge challenges in taking manual meter readings and generating consumption-based bills. Similarly, maintenance activities have also been severely impacted. In many cases, preventive maintenance activities have been indefinitely deferred to avoid the movement of field workers who inspect and maintain equipment. Capacity building and network expansion have also suffered, with delays causing cost overruns for utilities, as have the cash collection and revenue generation processes.

  • Digital transformation opportunities

During the pandemic, industries and service sectors started understanding the need for digital transformation and many utilities sped up their transformation journeys. Some of the digital measures that would have been useful for utilities during the pandemic are:

  • Operational activities on utilities networks could have been executed remotely using advanced distribution management systems (ADMSs).
  • Revenue collection could have been strengthened by using more online options.
  • The widespread implementation of AMI could have enabled utilities to remotely read meters to generate bills based on actual consumption.
  • The provision of a TOU tariff for residential customers in presence of AMI could have reduced the impact of the existing tariff structure.
  • Automated inspections could have reduced the impact on preventive maintenance schedules.
  • Multichannel customer relations could have enabled utilities to maintain close ties with their customers.

In summary, utility service providers need to think deeply about the required contingency plans for any operational disruptions and create alternative sourcing options in addition to ensuring the safety and well-being of their employees. In doing so, the bridging of the digital world with the physical world will play a key role. Technologists from the digital world need to work with utilities SMEs to understand the real issues in the age-old utility business processes and transform them to build successful, competitive, and future-proof utilities.

For more details on this please reach out to Mukul Sarkar, Senior Manager, E&U Industry Hub.