The worldwide economic downturn caused by the coronavirus pandemic is having widespread effects on investments in the energy sector. According to the International Energy Agency (IEA), estimated investment in energy efficiency and end-use applications is expected to fall by 10 to15 percent this year as vehicle sales and construction activity weaken and spending on more efficient appliances and equipment is scaled back. Consumers are looking to pay their bills and to return to a more normal life.
That normal life may be a bit different after the pandemic is over, for consumer patterns are also changing. Consumers are leery about using public transportation. They are driving alone and many are purchasing used vehicles rather than the more efficient new cars on the market. Homeowners have delayed retrofits because they are leery of close contact with strangers that might be potential carriers of the coronavirus. Buildings are sitting empty because employees are working from home, but they are still consuming energy. Aviation connoisseurs are considering taking flights to nowhere so that they can stay home but still enjoy the thrill of a plane ride.
Car ownership has become more popular during the pandemic, even in unlikely places like Manhattan where $400 a month is considered a “cheap price” for an indoor garage space. The New York State D.M.V. processed 73,933 original car registrations in the five New York City boroughs over June and July–an 18 percent increase over the 62,507 registrations from the same time last year. For many new car owners, cars represent freedom to travel to the beach, the countryside, or even a grocery store with a parking lot.
Ridership on commuter systems is way down but they are still operating and consuming energy. Ridership on commuter rails that bring white-collar workers into urban areas has plummeted by as much as 97 percent, while ridership on rail systems dropped by 90 percent. Municipal buses, where riders have less options, experienced a lesser drop—closer to two-thirds. About 27 percent of the college-educated workers in New York City reside outside the five boroughs, and if they will not take buses when they return to working at city businesses, the city will be faced with huge congestion issues.
Some metro areas have public relations campaigns to coax people back. For example, the Washington, D.C. Metro is providing individually wrapped face masks at stations, after receiving about one million masks from the federal government.
Large buildings are almost empty as employees work at home, but the buildings are still consuming energy for heating and cooling, and they are cycling more outdoor air into ventilation systems. Some building operators are running their ventilation systems more frequently and with more outdoor air to ensure better air flow to fight the coronavirus, which could double or even triple energy use. Despite virtually all major U.S. cities having locked down in April and May with empty offices, energy consumption by commercial buildings declined by only 15 percent,
Restaurants are using outdoor heaters to warm the air as patrons prefer outdoor dining and/or local governments are limiting seating in indoor dining areas. Almost 50 percent of full-service restaurants are planning to extend outdoor dining seasons, including patio heaters, according to a survey by the National Restaurant Association. Other businesses, like ski lodges, are also buying more outdoor heaters. Heating outdoor patios is a new, non-trivial cost for businesses. The most popular energy source is propane, a liquid gas that comes from crude oil and natural gas, because the heater is freestanding and can be moved around more easily than electric heaters. One estimate is that restaurants in New York City using outdoor heaters consume about 1,600 barrels of propane a day. Approximately 100,000 barrels of propane are typically used for commercial uses throughout the entire United States. Paraco, a New York-based propane company, has increased its sales of fuel tanks from 100,000 per month to 250,000 tanks to New York City and surrounding areas. A big-box store that sells patio heaters indicated sales were up 1,500 percent.
Most schools are operating at least partially, virtually. In-person schools had an efficient teacher/student ratio of about 1 to 23. Ad hoc virtual schools have a ratio closer to 1 to 1. School buildings while only a fraction full are consuming energy as are the homes that students are in while studying virtually. Some states (e.g., California) are retrofitting school HVAC systems to make them safer from COVID contamination and to make them more energy efficient.
Cuts to Energy Efficiency Programs
Revenues for energy efficiency programs are being cut to help consumers pay bills. In Missouri, the Office of the Public Counsel recommended that the state’s regulators cut the charge on customers’ bills that funds energy efficiency programs as a way to ease the financial burden on customers dealing with economic fallout from the coronavirus pandemic. In Ohio, the state’s consumer advocate suggested that utility efficiency program funds be diverted to bill payment programs.
Issues with Efficiency Programs
Savings from energy efficiency programs are often inflated because of free riders and the rebound effect. “Free riders” are customers that receive rebates for upgrades they would have made anyway, which are generally paid by federal and local governments. It is considered an example of a market failure. It is an inefficient distribution of goods or services that occurs when individuals pay less than their fair share of the costs.
The rebound effect occurs when efficiency improvements result in additional energy use due mainly to lower energy costs. For example, when a consumer buys a more efficient vehicle, the cost to fill the tank goes down so the vehicle owner ends up driving more negating some of the savings from the increased efficiency of the vehicle.
Energy efficiency improvements are on the decline as consumers fear close contact with potential coronavirus carriers. Consumer habits have also changed as work at home becomes the national norm to the extent that jobs allow. Traveling habits are changing as Americans are purchasing cars rather than use public transit. Air travelers are taking rides to nowhere. Commercial buildings, despite being devoid of workers, are still consuming energy and increasing ventilation. New sources of energy use have sprung up as restaurants and other areas are heating the outdoors to make patrons more comfortable. States are looking at ways to help consumers pay bills by cutting energy efficiency programs.
Despite these changes in energy efficiency investment and consumer habits, Democratic Presidential Candidate Biden has plans to radically change the U.S. energy system that will make energy more expensive, create new taxes for consumers to reduce fossil energy use, and push Americans into public transportation that they are currently escaping from. Biden needs a reality check—the American public is not in tune with his future plans. They want to recover from the hardship of the pandemic.