The impact of COVID-19 containment measures on changes in electricity demand

Abstract

Emergency measures imposed by governments around the world have had massive impacts on the energy sector, resulting in dramatic reductions in total energy demand. The New Zealand government introduced strict containment measures in response to the Covid-19 virus. We use an augmented auto-regressive-moving-average model to assess the impact of containment measures on wholesale electricity demand. The study spans the period 27 February 2020 to 23 February 2021. Results show that the Alert Level-4 lockdown had the largest, significant, and negative effect on electricity demand compared to other containment level measures. Specifically, Alert Level 4 resulted in a 12% reduction in wholesale electricity demand. Structural breaks in the data are evident as containment progressed to Alert Level 1. This unprecedented experiment provides insights into underlying patterns of electricity demand, therefore, projection of economic activity. Furthermore, the analysis offers insights into the performance of the electricity market when both aggregate demand and the pattern of demand change in response to exogenous constraints. Finally, the outcomes of this analysis also provide a robust reference for other countries on how the New Zealand market performed.