LONDON (ICIS)--Demand for power and gas in Spain in 2020 is expected to remain low year on year despite the recent easing of the coronavirus containment measures.
Power demand remained far below levels seen in 2019 between 10-16 April, the first week after coronavirus containment measures were relaxed in Spain. Power demand in the country fell 21% year on year, data from grid operator REE showed. ICIS data similarly showed that demand for domestic gas in the country was down 24% year on year for the same period.
This drop was likely exaggerated due to the Easter holiday period falling during those dates in 2020 and not 2019.
In the summer months, the coronavirus impact on Spain’s tourism sector is likely to keep power and gas markets under heavy pressure. If state-enforced restrictions continue to restrict international travel to Spain, energy demand will take a heavy hit.
Tourism is one of the key industries in the country.
Although Spain recently relaxed the restriction measures on commerce and industry, traders polled by ICIS considered it unlikely that Spain would return to 2019 levels of economic output over the summer.
CCGT DEMAND FOR POWER
In addition to the year-on-year drop for gas demand, CCGT use in the power market is likely to remain low with renewables poised to further increase their share of power production in the country.
It is unlikely that CCGT will be used for power generation during May and June because of the growing installed capacity of renewables such as solar, according to one trader. During the first quarter of 2020, CCGT accounted for 11.6% of the power mix, according to REE. The source had previously accounted for 12.4% of the generation stack during the same time last year.
Gas demand from the power sector, along with gas prices, may find some strength after July. During the hottest months of the year in Spain, CCGT plants often ease the burden on solar assets to reduce the risk of panels overheating.
MUTED DEMAND RECOVERY
On the short term, one source active in the Spanish power and gas sector told ICIS that he did not expect demand recovery to be that significant. As many businesses had been deemed ‘essential’ during the lockdown period the easing of restrictions may not therefore see a significant and sustained upward demand swing from Spanish industry.
Sources based in Spain and active in the energy sector said that the demand uptick following the easing of economic restrictions would mainly come from the construction sector. The industry had been the most-affected during the lockdown period, they said, but had returned to normal activity after 9 April.
ICIS has recently highlighted the impact of the coronavirus lockdown on renewables construction. In the case of solar, the main consequence of the lockdown has been on the delay that projects will experience on their construction schedule and timeline.
The Spanish government had suspended all non-essential activity on 28 March until 9 April, in addition to an existing nationwide lockdown to combat the spread of the coronavirus.