During coronavirus, a drop in electricity demand could signal economic problems

How do you rate the economic impact of coronavirus? An economist from Chicago says you need to look at energy consumption. Credit: Shutterstock.com

As Americans are mostly self-insulated amid concerns over COVID-19, electricity demand is already declining in some of the most affected areas. Could this be a sign of future events?

University of Chicago economist Steve Chicala has studied what happened to demand for electricity in Northern Italy, which some say is about 11 days ahead of the American trajectory of the novel coronavirusAn assistant professor at Harris School of Public Policy, Cicala, collected regional network data based on weather changes and found that electricity demand in Northern Italy had fallen sharply since mid-February.

On Friday, February 21, life in the region was mostly normal. The next day, the Italian government began to introduce quarantine measures. By Monday, electricity demand began to slow. As can be seen from the diagram below, before the government established a national block in about two weeks on March 10, there was a sharp jump in power. A week after that, demand for electricity fell 18% compared with demand immediately before quarantine measures. ,

Cicala, an expert on the economics of environmental and energy policy regulation, said real-time electricity demand could be an indicator of the wider impact on the Italian economy. And what is happening in Italy may indicate what the United States can expect in the coming weeks, when states impose more stringent restrictions on daily life.

During coronavirus, a drop in electricity demand could signal economic problems

Courtesy: University of Chicago Institute of Energy Policy.

“If salaries and employment follow what happens in electricity demand data, that is, a lot of people who will need help, "said Cicala, a researcher at the Institute for Energy Policy at the University of Chicago.

According to him, when a sharp shock is observed in the economy, other indicators, such as employment, may lag behind in reflecting the impact. This is because companies often lay off workers as a last resort after they have already taken other measures, such as cutting production or adjusting maintenance schedules. Conversely, electricity demand shows faster changes and is a broad indicator of economic activity.

This model was on the screen during the last recession in the United States. US. power According to the National Bureau of Economic Research, demand began to fall one month before the official recession start date in December 2007 – the date that was determined after collecting data for an additional year.

Since politicians today consider what countermeasures may be necessary to contain the economic consequences of using coronavirus, a real-time indicator of the strength of the economy is of utmost importance.

EU supports Italy's bold measures to fight the virus

During coronavirus, a drop in electricity demand may signal economic problems (2020, March 20)
retrieved March 21, 2020
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