The COVID-19 Pandemic : Energy Market Disruptions and Resilience
In California , ongoing issues with electric service increasing wildfire risk threatens to make a challenging situation worse as utility shut offs could encourage congregation ( while conversely wildfires could cause congregation in shelters ). More generally , the arrival of hurricane season in the U . S ., one of the chief threats to electric reliability , could strain response and restoration of service .
Policy Complications and Conclusions
Energy reliability and resilience has traditionally been conceived of as a supply problem . Specifically , systems must be designed to ensure that there is sufficient energy supply in times of supply disruption . For electricity , this means ensuring adequate electricity capacity during periods of high demand and coincident supply outages . For oil markets , this has entailed the establishment of strategic storage reserves , with international coordination to ensure domestic markets can survive disruptions .
The unique nature of the pandemic has made clear that resilience measures must also consider demand disruptions . Although less severe than a supply disruption , which clearly threatens the availability of energy services , demand disruptions can nonetheless have powerful , long-lasting impacts . Coal in the United States and other countries may recover in the short-term , but the operational constraints imposed by relatively high levels of renewables on reduced demand systems provide important lessons for future grid operators . 31
In oil markets , the International Energy Agency ( IEA ) took a leading role in encouraging countries with spare storage capacity in their strategic reserves to fill that capacity during second quarter supply disruptions . While small in the overall scheme of the pandemic demand collapse , these increased storage injections helped the overall oil system maintain balance as supply ramped down and commercial storage filled . Moving forward , having spare storage capacity in strategic reserves can provide protection against demand disruption . Developing a framework to manage that is needed , as such injections should be guided by system resilience needs , not market price balancing concerns .
The cascading effects of industrial production being curtailed on global electricity projects illustrates the growing risks of global just-in-time supply chains . Market dominance of solar panels by China meant that what originally was a domestic problem curtailed global projects before the problem became global . Shipping proved to be a particular bottleneck . Meanwhile — although internal OPEC + conflict over controlling prices through supply curtailment were outweighed by
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31 Birol , F . “ The coronavirus crisis reminds us that electricity is more indispensable than ever .” March 22 , 2020 . https :// www . iea . org / commentaries / the-coronavirus-crisis-reminds-us-that-electricity-ismore-indispensable-than-ever
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