How does the demand for electricity in the countries of the region behave during the post-covid economic recovery?

Transformation of electricity demand

By: Franco Carvajal, Edilberto Matias and Michelle Hallack

After more than two years of pandemic, the countries of Latin America and the Caribbean (LAC) are returning to a “new normal” thanks to their vaccination plans and an economic revival. As the confinement was so important to stop the spread of infections, the guarantee of the continuity of network services (electricity and internet) was key to sustaining economic activities during the pandemic. However, the impact of the pandemic on electricity demand was very strong in some countries, with changes in the amount and profile of demand.

Thus, monitoring the behavior of electricity demand is key to observing the usual productive recovery of countries as a result of the pandemic, and also serves as information for the investment forecasts required for the electricity sector..

At the IDB we have been monitoring the pulse of daily electricity demand in the countries of the region through a data visualization tool in the Energy Hub and through other blogs and publications. With this data we can carry out various analyzes to see the impact of the first days and months of the pandemic, see how countries return to their usual level of consumption, or simply find out about daily consumption in a period of interest (holidays, year-end , weekends, seasons of the year) and compare it between countries.

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We must highlight that, in the last two decades, the trend in electricity consumption in LAC had been growing at an annual average of 2.5% until 2019. With the pandemic and the first confinement measures in March 2020, demand from 13 countries fell by 8% in the immediate period of the crisis if we compare consumption between March 15 and April 30, 2020 with the same period in 2019. The impact was heterogeneous across countries according to the start and duration of confinement (see Figure 1, panel A). Those countries that decreased their demand the most, such as Peru (-29%), Bolivia (-19%), El Salvador (-17%), Panama (-16%) and Brazil (-10%), were those that also saw further economic decline in the region[1]. Already in September and October 2020, a temporary recovery greater than that registered in 2019 began to be seen in at least 8 of 13 countries, but demand fell again slightly at the end of 2020 and the beginning of 2021 associated with the confinement measures derived of new variants of COVID-19. Thus, 2020 as a whole left an annual decrease of -2.5%, being the largest drop recorded since 1990. The sectors that decreased their consumption the most were transport (-13.6%), commerce (-8%), agriculture and mining (-1.4%) and industry (-0.7%).

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Figure 1. Impact and recovery of electricity demand

How does the demand for electricity in the countries of the region behave during the post-covid economic recovery?
Source: Energy Hub with information from market operators.

Since March 2021, as the economy recovers, electricity consumption recovers to a level similar to that of the pre-pandemic, and at the end of the year demand increases notably in most countries (see Figure 1, panel B) highlighting the growth of the Dominican Republic (12.3%), Brazil (6.3%) and Honduras (5.9%).

The growth in demand observed in 2021 is strengthened in 2022. The daily figures for January and February 2022 show that the trend in demand is in line with the growth observed in the pre-pandemic years, also driven by the effect of economic recovery and the return to the new “normal” work in most of the productive sectors (Figure 2). Between January and February 2022 (compared to the same period in 2019), countries increase their demand between 0.8% in Uruguay and 19.5% in the Dominican Republic.

Figure 2. Growth in electricity demand in 2022

How does the demand for electricity in the countries of the region behave during the post-covid economic recovery?
Source: Energy Hub with information from market operators.

In the long term, the demand trends at the end of 2021 and the beginning of 2022 are in line with the growth observed in the last two decades, which is a key and rapid indicator to understand, on the one hand, the variations in the economy, and on the other. another can help us estimate investment needs. In this dimension, even though all the countries analyzed have returned to levels of demand higher than before the pandemic, there is great heterogeneity in growth, which can be explained by the different levels (speed and sustainability) of economic recovery of the countries. In the medium term, seasonal variations in demand are very important, as they allow us to understand the impact of the weather (and climate changes) on electricity consumption. For example, it is perceived that there is a tendency in many countries to have two increasingly strong peaks in summer and winter (due to the use of air conditioning and heating). In the short term, variations in daily and hourly demand allow us to understand the behavior of families in specific short periods. For example, during the pandemic changes in habits were observed, which is reflected in the hourly variations of energy use, however, no changes were observed that are maintained. Thanks to this data visualization provided by the Energy Hub, all these electricity demand perspectives can be analyzed.

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[1] See GDP growth rate figures between 2020, 2021 and projections for 2022

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