Five ways coronavirus could change the utilities sector

With obvious consequences of the coronavirus outbreak being seen across the world this week, what are the key issues for UK utilities? Utility Week examines the impact on workforce, customers and the retail market, among others.

The week could be seen as a watershed moment in the development of coronavirus.

In the UK, the number of cases leapt from 36 at the start of the working week to 163 at the end of it, with the first fatalities recorded. While the narrative had largely been driven by the media until this week – often greeted with accusations of sensationalism – the government’s own plan is as dramatic as anything produced by Fleet Street.

Meanwhile, businesses across multiple sectors, in many countries have made stark warnings, and Flybe was a high profile casualty.

Across the world – and close to home – real impacts are being felt, on economies, jobs and the way people live their lives.

Utilities are, of course, not immune to this and while there is no reason to believe that our sector will be affected any more than others, it is clear there will be consequences.

But what will these be, and will they all necessarily be negative?

In conversations with industry figures and observers, five key areas have emerged so far:

Workforce

The most immediate decision to be made is how staff can be kept safe and how businesses can mitigate infection within their workforce.

We have already seen workers self-isolate at Hinkley Point C after visiting Italy and Tenerife and a deep clean carried out, while a Chinese national who worked at the plant has tested positive for coronavirus after returning home.

Other companies, including Severn Trent, have been asking workers to self-isolate if they have visited infection hotspots while many have imposed travel restrictions, bolstered provisions for employees to work from home and set up pandemic working groups.

Andy Perry, energy principal at global consultancy, Oliver Wyman, told Utility Week most companies would be looking at the same thing – limiting non-essential travel and protecting their workspaces from becoming contaminated.

He predicted that, especially if protections are in place for the long-term, this could end up having a lasting impact on the way we work.

He said: “It’s forcing a test of how you can use technology in a way that hasn’t been forced before. There were options there before that no one necessarily would have chosen but that do make sense. Why get everyone in one place for a meeting if you can do that virtually?

“Obviously not every job can be done remotely but there a significant number that can – and far more than are currently making use of the technology available. If, for a prolonged amount of time, we have to work around the need to have key people in one room, will we ever go back?”

Billpayers

Those dramatic profit warnings mentioned earlier could have very real implications on the country’s workforce.

Given the issue of vulnerability is already one of the key challenges facing the sector, what more needs to be done to cope if this definition is suddenly and dramatically widened?

Retailers

The delicate balance between success and failure in the energy retail sector is well known and the exit of Tor Water from the non-domestic water market last month highlighted the pressures in this sector. Added pressures on staffing could exacerbate existing issues for the challenger brands, while the intense pressures being felt by the incumbents will only worsen if there is widespread absenteeism.

Perry said: “We have already seen a regular flow of businesses exiting the energy retail market over the past two years and the struggles many of them have in meeting their financial requirements has been widely reported.

“Call centres could be badly affected by this and the impact of that could cause significant extra problems.

“It’s not just at the challenger end. The incumbents are dealing with creaking systems and well-known financial pressures. Mass absentee-ism is the last thing they need.”

There is also a question mark over how it could affect the smart meter rollout, with the inevitable sensitivity of suppliers visiting people in their homes.

With the revised deadline of 2024 already viewed with suspicion by many in the retail sector, could this render it utterly impractical?

Renewable generation

While overall the dip in travel is likely to provide an unexpected boon to decarbonisation efforts, there may be consequences for construction of renewable projects if manufacturing hubs are impacted. If the production of solar panels in China is impeded in the long-term, what will the consequences be across the UK?

Richard Nourse, the founder of Greencoat Capital, told Utility Week: “There is inevitably going to be an impact on construction. In solar that’s an obvious one, with something like half the solar panels in the world made in China.

“For turbines it’s unlikely that the China situation will have a huge impact but then who knows where else production might be hit.”

Gas prices

The most direct implication of the global spread of the virus is the effect on gas prices, which have continued to slump.

Lakis Athanasiou, utilities analyst at Agency Partners, said: “(Coronavirus) has exacerbated the gas glut. Prices were already on the floor and demand has now been hit in Asia. There is an impact on Europe, particularly the UK, because it drives the electricity price.

“There are more opportunities for discounting in residential supply with low gas and electricity prices and a default price cap based on higher wholesale prices.”

Your views

These are just a few of the possible ways in which the spread of the virus could impact on the sector.

Utility Week is interested to hear your views to build a picture of how the industry is reacting. You can record your experiences in this reader poll.