Skipping Stone Releases Energy Industry Coronavirus Impact Study Results
Boston, Massachusetts – April 9, 2020 – Skipping Stone, a global energy markets consulting and technology services firm released today the results of their coronavirus impact study of the energy industry. The study was performed in March and focused on anticipated business and operational impacts as well as electricity demand destruction.
The study measured management viewpoints from three energy sectors, gas and electric utilities, wholesale and retail energy gas and electric marketers and energy services and technology companies. March was chosen as awareness of the crisis in the U.S. was early, the federal and state governments had just begun to react, and the infected and mortality counts were just starting to grow. As such, in March the impacts on business were just becoming evident with the future unknown.
Some results were consistent across the three types of energy market participants. For example, 80% of all the companies had already ramped up customer communications in March. All three sectors were equally uncertain how long coronavirus would impact business operations with answers evenly spread across 30–60 days, 61-90 days, and more than 90 days. Only 10% believe the impacts will last longer than 6 months. The three sectors generally agreed on the financial impacts with 22% responding they expect a significant negative impact on revenue and profits, 52% anticipating some impact, and 25% indicating they don’t expect any financial impact.
Other results highlight different viewpoints among the three sectors studied. For example, the challenges from the huge shift to home-based workers was viewed differently. All sectors anticipate reduced productivity; however, the wholesale/retailer sector scored this concern much higher. Utilities indicated more challenges with IT issues and getting decisions made than the other two sectors.
Plans to cut costs varied widely between the sectors. 36% of utilities had no specific plans to cut costs, while only 4% of energy services and technology companies indicated no plans for cost cutting. 28% of wholesale and retailers anticipate either layoffs or salary reductions and 34% of the services and technology sector plan to do the same. Only 8% of utilities indicated plans for either layoffs or salary reductions.
For demand destruction assessment, Skipping Stone enlisted Scoville Risk Partners who has been utilizing its proprietary analytics software and databases to measure week-over-week demand reductions in wholesale power markets in key U.S. population centers due specifically to the coronavirus.
Electricity demand decreased in correlation to either a rise in coronavirus cases or state government stay at home orders. New York City, a coronavirus hot spot experienced demand decline in the first week of March of 1.41% and by the last week demand had declined by 14.87%. In California demand decline correlates to Governor Newsome’s March 19th stay at home order. In the period prior to the 19th, electricity demand for the utility SCE, serving southern California, was normal. The week after the stay at home order, SCE demand fell by 8.29% with a further drop to a demand reduction of 12.89% the last week of March.
“We hope that this study can be used by the energy industry to benchmark early assumptions against actual outcomes for emergency response planning for crises such as the coronavirus,” said Skipping Stone Chairman and CEO Peter Weigand. “While it would be nice if this were a once in a lifetime crisis, my sense is the frequency of regional and global events is only going to grow going forward. Although it seems we can’t prevent them, we can be better prepared.”
For a complimentary copy of the study results, visit https://skippingstone.com. For continuous updates on electricity demand destruction, visit www.ScovillerRiskPartners.com
