By Russell Gold
Demand for electricity is beginning to weaken in parts of the U.S. hardest hit by the coronavirus and could fall further in coming days as shelter-in-place orders spread, following a path taken by Italy’s industrial region.
Power demand cratered in northern Italy, the epicenter of a major coronavirus outbreak, in the last few days, a real-time indication of the potential depths of the economic downturn in the wake of the spreading pandemic, according to a new analysis by Steve Cicala, an assistant professor at the University of Chicago who studies energy markets.
Electricity generators, traders and economists are watching demand figures closely to see if the U.S. follows the same trajectory.
“If paychecks and employment follow what is happening in the electricity-demand data, then there are a lot of people who will need help,” said Mr. Cicala.
The contraction in northern Italy over the past month is severe. Electricity demand on Monday in the region was down 18.1% from Feb. 21, the day before Italy began to implement a regional quarantine, according to Mr. Cicala’s analysis of regional grid data compiled and adjusted for weather changes.
Mr. Cicala said during times of sharp turns in the economy, electricity data is potentially valuable to economic policy makers, because it is more immediate than other lagging economic indicators and is a broad measure of economic activity.
He noted that U.S. electricity demand began to fall in November 2007, a month before the official beginning of a recession. Twenty months later, at the trough, demand was down 5.3% from its peak.