The COVID-19 pandemic has added an extra layer of complexity to near-term electricity demand forecasting, but energy companies and policymakers must avoid drawing hasty conclusions about its long-term impact on the electricity sector, industry officials told FERC on Wednesday.

“My key takeaway for you is that COVID-19 must not be viewed by our industry as a rationale to halt progress and defer planning and reform,” LS Power CEO Paul Segal said during a panel focused on the pandemic’s effects on transmission planning and system forecasting, part of a two-day virtual FERC technical conference focused on pandemic-related issues for the energy sector.

“I worry that the easy takeaway from our very recent experience will lead the industry to extrapolate forward to an environment with lower demand,” he said.

Segal thinks “the most difficult economic parts of COVID-19 are hopefully behind us” because of the fiscal stimulus enacted by Congress and aggressive actions taken by the Federal Reserve to rescue financial markets from “freefall,” which opened credit markets to even the most “impacted” economic sectors such as airlines and cruise line companies.

“I expect within a year, our perception of COVID-19 will be very different because we learn how to live with it,” Segal said. “Our actions will change the trajectory of the disease, [and] we will learn how to treat the symptoms to reduce severity and/or immunize against it.

“It would be dangerous” to rely too heavily on the recent experience of declining electricity demand to predict new trends in energy use in the U.S., he said, cautioning that “events like COVID-19 tend to trigger paradigm shifts.”

“Today there are many paradigm shifts happening all at once. That leaves us needing to consider a number of questions about how these changes will impact demand and usage patterns for electricity,” Segal said.

One “key” shift? The way people work, with more staff working from home and “less densification” in offices.

“Fundamentally, I expect this to lead to the less efficient use of space and, as a result, the less efficient use of energy, including electricity,” Segal said. “Office electrical systems will need to run perhaps at a modestly lower capacity level than might’ve been required otherwise, but more people will be at home, and this will lead to the use of electricity to heat, cool and light the home when previously it might’ve been unoccupied. In the aggregate, this may result in a meaningful increase in electric demand, in the intermediate term.”

Working from home could also drive consumption of natural gas, which could be problematic for areas like New England, where supplies can become constrained during winter, producing knock-on effects that can be “non-linear and multifactorial,” which “can often be derivative of one another.”

“For example, the recent [economic] collapse has crushed drilling for oil in many shale plays,” Segal said. “The indirect consequence will be the reduction in the availability of essentially free, associated natural gas. Natural gas prices will need to incentivize more drilling for natural gas as we move forward, and it’s conceivable that in this new paradigm, we will have natural gas prices move into a range that’s persistently 50% higher than what we would’ve expected them to be before COVID-19.”

That would translate into higher electricity prices, which could in turn improve the economic fortunes of coal and nuclear power plants enough to prompt a political response for increased green energy investment.

Time to Invest

Segal’s advice to the commission was fitting for the CEO of competitive transmission developer: In short, clear the way for the construction of new transmission to aid in economic recovery and relief.

“As we focus on the road back, we should keep in mind that affordable electricity to a large extent is a function, to a large extent, of transmission grid optimization,” he said. “Competitive procurement in regional planning of transmission must remain a priority as we tackle affordability going forward. The regional planning process must be robust enough to enable the RTOs to plan for and facilitate the construction of the power grid of the future, one that anticipates and supports states’ evolving energy investment policies and goals, rather than sitting idly by while every element of yesterday’s aging grid is simply rebuilt and replaced with the same facilities that have reached the end of their useful lives.”

Vistra Energy CEO Curt Morgan similarly took up the importance of FERC continuing to foster competition in response to economic decline, but with the differing spin of the head of competitive generation company that’s been critical of state support for favored renewable resources.

“The multitude of market-rule changes in FERC jurisdictional markets over the last several years, many driven by out-of-market activities, and the unpredictable and uneven pace with which these changes are implemented, have created a sector-specific risk for integrated competitive energy companies like Vistra and created questions in the minds of investors about our sector,” he said.

Morgan — whose company supported of FERC’s controversial decision last year to apply PJM’s minimum offer price rule to new state-subsidized resources — encouraged the commission to “remain supportive of competitive markets and ensure all resources compete on a level playing field.” (See PJM’s Season of Change not Over yet.)

But he counseled FERC against pushing the industry to respond too quickly in response to the pandemic.

“We expect that until we get a vaccine or an effective therapeutic, it is going to be an uneven economy with fits and starts, but our advice in this is not to take the early effects of COVID and extrapolate this too far into the future,” he said. “We don’t know enough about what’s going to happen, and we certainly don’t want to contribute to long-term ripple effects.”

Gil Quiniones, CEO of the New York Power Authority, expressed concern that the economic downturn could pose challenges for New York’s efforts to generate 70% of its electricity from renewables by 2030 and have a carbon-free grid by 2040. As one of the original epicenters of the pandemic, the state experienced a 10% decline in electric load at the height of the outbreak, Quiniones noted.

“In addition, New York state’s strong economy, the prime driver of the state’s electric load, has seen a decline, and might not return to 2019 levels for quite some time,” he said. “This reduction in load and the uncertain pace of recovery will have a direct effect on planning the much-needed expansion and upgrades to major power infrastructure. While transmission planning might be difficult, now is the time to invest in the power grid, to meet clean energy goals and to help restart the economy.”

“Practically speaking, we don’t see this as having a long-term planning impact,” MISO President Clair Moeller said, adding that load in his RTO’s footprint has been flat since 2007.

“The dominant transmission we are building is to accommodate the change in generation fleet. We do not see our members changing those plans, so at this point in time, we don’t see a need to adjust any of our planning practices — but of course we’ll keep that front and center because that’s one of the more important parts of what we do,” he said.

‘Fluid’ Situation

Moeller also told commissioners that MISO’s load profiles have flattened since the outset of the pandemic, reducing the need to ramp the system to meet demand.

“That contrasts significantly with polar vortex kinds of problems, where the ramp problem is exacerbated by the cold-weather events,” he said. “We only have four months of experience with this event. We expect the situation to continue to be fluid into the future.”

FERC Chair Neil Chatterjee asked Moeller to elaborate on how the pandemic might affect RTOs’ approach to short- and long-term load forecasting.

Moeller said that the self-learning neural network software most grid operators rely on for forecasting struggled at the outset of the pandemic because it lacked an applicable history for producing short-term forecast under new conditions.

“The forecasts that we initially provided typically were for too much capacity to be on rather than not enough, so while the mistakes were important in terms of efficiency, they didn’t have a negative impact on reliability at all because typically we would start one unit too many rather that one unit too few,” Moeller said, adding that the forecasting tools eventually learned to adjust to the new patterns.

“The change from shutdown to reopening is more gradual, so we’re not seeing the kinds of errors as the economy reopens that we saw when it shut down suddenly,” he said.

Moeller said the pandemic has not yet provoked MISO to make any changes to its long-term load forecasting.

“We continue to think that challenges to the electric system [will] have to do with the change in resources, mostly, and then the question around the electrification of transportation is an important one in a five- [to] 10-year kind of time horizon,” he said.

‘Every Kernel’

FERC Commissioner Richard Glick asked the panelists if they felt RTOs and ISOs have been transparent enough in the how they have updated their load forecasting processes.

“I think the processes are reasonably transparent,” Segal said. “What I worry about is there can be a tendency to fall back on tools that have been used in the past, and I think we’re in an environment that needs to consider a much broader range of possibilities. We’re going to be OK if we have too much generation and too much transmission capacity. We’re going to have big problems if we’re surprised and have less generation available than we need.”

Morgan said his biggest concern regarding forecasting was “really trying to extrapolate anything meaningful going forward from the effects of a virus, where human behavior — such as not wearing a mask or going into a large crowd — can change what’s happening in a given state within a couple of weeks.”

Morgan said Vistra is “looking for every bit and every kernel of information” from government officials and state utility commissions to identify as early as possible whether states are going to shut down or put in stay-at-home measures again.

“Because this thing is so fluid right now … you can’t really extrapolate off of it at all,” he said.

Chatterjee asked Public Utilities Commission of Ohio Chair Sam Randazzo what he and his colleagues “have been thinking about most during this time.”

“The global observation that I would make is that we’re not dealing with an energy infrastructure problem; we’re dealing with a public health problem,” Randazzo said, adding that regulators can best contribute to addressing the health emergency by providing “flexibility” to those on the front lines of contending with the pandemic.

“From a planning perspective, the pandemic scenario is really a people problem: You’ve got to have enough people; you’ve got to take care of your people — the human resources that you need — because the virus affects human resources,” he said. “So, if you can tell me the public health scenario that we’ll be dealing with tomorrow, we can probably then plan from an infrastructure and resource perspective what we can do to contribute to a positive resolution to the public health emergency.”

In response to Chatterjee’s question about what industrial energy consumers are taking away from the pandemic experience, Electricity Consumers Resource Council (ELCON) CEO Travis Fisher expressed concern that while his member companies “are taking cuts where needed,” those in the utility space are “basically keeping their plans the same.”

“I’m a little bit concerned about that because the costs of the transition that those folks are undertaking … are ultimately going to fall on consumers like ELCON members,” Fisher said.

Responding to Chatterjee’s question about what impact the pandemic has had on the Western U.S., Stefan Bird, CEO of PacifiCorp’s Pacific Power subsidiary, specifically addressed his company’s position.

“COVID, for us, has not much impact on our ability to deliver our core mission of reliability, affordability and safe service of electricity while we continue to radically change our portfolio,” Bird said, noting that PacifiCorp has the advantage of drawing on resources from a 10-state footprint.

“I would argue the most expensive route would be to isolate yourself on an island and limit your options. And, thankfully in the West, we’ve got this tremendous abundance of low-cost resources, but they are very diverse,” he said.

Bird also said the pandemic has had no effect on PacifiCorp’s ability to prepare for the looming wildfire season. “There’s been no impact to our efforts to really dramatically increase our resilience and hardening efforts,” he said.