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The Power of COVID-19

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Chetan Sharma, Research Associate

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Power demand is a sometimes overlooked, but particularly interesting indicator to monitor the impact of COVID-19 outside of China because of its correlation with economic activity. Manufacturing accounts for 30-40% of GDP in South Korea, Japan and Italy, while the share of power consumption in manufacturing averages 40-50%. Should the spread of COVID-19 induce governments in these countries to implement lockdowns, power demand and economic output will be negatively affected.

As Japan and South Korea have not gone to lockdown and Italy’s is very recent, we haven’t yet seen significant impacts of the virus on power demand in the three countries (Figures 1-3). The pink line shows monthly averages of daily peak demand (Korea) or daily average demand (Japan and Italy). The dotted green line shows a weather-adjusted estimate for power demand.

As manufacturing activity slows under a lockdown, demand for refined oil products and petroleum feedstocks also drops. With fewer manufactured goods to move, and fewer raw and intermediate materials being delivered to factories, the demand for transportation shrinks.

The data for these charts was collected only a couple days after Italy went into lockdown. As more data becomes available in the next few weeks, we will get a better idea of how the spread of COVID-19 is affecting power demand and petroleum product consumption.

FIGURE 1 | No Lockdown in South Korea, No Material Change in Power Demand

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Source | RSEG, Korea Power Exchange

FIGURE 2 | Japan Treading Same Path as South Korea: No Lockdown, No Material Impact

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Source | RSEG, Tokyo Electric Power Company  

FIGURE 3 | Italy Recently Implemented Lockdown, No Material Changes Yet 

 

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Source | RSEG, Terna Group 


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