European electricity demand rebounding amid coronavirus lockdowns

Author: William Peck

2020/04/22

LONDON (ICIS)--Power consumption has partially recovered in most of Europe’s largest countries in recent days and weeks, according to ICIS models that control for the impact of temperature, calendar effects and seasonality.

This shows not only that demand has reached a floor in most of these countries, but that factories and other large energy users have found ways to reopen at least in part in the face of lockdowns aimed at stemming the spread of the coronavirus.

The results suggest that a great deal is in flux with the virus’ impact on energy demand, even as lockdown rules remain in place. But with some manufacturers returning to work and countries poised to ease restrictions, it is likely that Europe has already taken its biggest energy demand hit from the virus.

THE MODELS

ICIS used multiple regressions to find the closest statistical fit between daily averages for electricity demand and other data in Italy, France, Germany, Spain and Britain in March and April between 2015-2019.

• Due to heating, temperature had a negative relationship with electricity demand in Europe as it remains too early in the summer for cooling demand

• Weekday, a binary variable set to one on working days and zero on weekends and public holidays, showed that demand rises with most offices and factories open

• A numerical variable set at 1 on 1 March and 61 on 30 April each year controlled for a seasonal drop in power demand beyond that explainable by milder temperatures, likely due to increasing output from distributed solar assets

• Likely due to some combination of energy efficiency measures and the economic impact of the UK’s exit from the European Union, British power demand fell in all-but-one year across the sample period; ICIS included an annual measure in just the GB model in order to control for this

The models were highly statistically significant, explaining 80-93% of the variation in power demand across the five countries.

2020 CORONAVIRUS IMPACT

In order to establish how much power consumption has fallen as a result of the coronavirus, ICIS compared data from this year to the models’ expectations based on 2015-2019, over rolling seven-day periods.

France and Italy, which both implemented early, strict lockdowns, were the first to see power demand rebound relative to expectations. This has continued in recent days after pausing over the Easter public holiday.

• Over the past week, French power demand reached 11.9% or 5.6GW below expected, up from a trough of 19.2% or 11.6GW below expected in late March

• Italian power demand remained down more at 18.3% or 6.1GW, but up from 23.4% or 8.4GW below expected across the final seven days of March

• Demand also rebounded in Spain, reaching 14.9% or 3.9GW below expected, compared with 20% or 5.5GW in early April

These countries have not eased public lockdown restrictions to account for the rising demand. Rather, some factories have switched from producing non-essential goods such as cotton buds before the crisis, to essential goods such as nasal swabs.

Other non-essential manufacturers such as carmakers are even reopening with compliant practices in place, sometimes tested at sites in China.

German power demand has ticked up to 10.7% or 5.8GW below expected in the past week, from a low of 12.4% or 6.7GW just a few days prior. German demand is likely to continue rising, after some shops and factories reopened on 20 April, and with schools set to follow on 4 May.

British power demand briefly rebounded over the Easter weekend, as housebound Britons consumed electricity. But this has subsided over subsequent working days, dropping to 16.1% or 5GW below expected. As the last of the five countries to impose a nationwide lockdown, Britain could be in line for a similar rebound. But relatively small manufacturing sector could limit the scope of this rebound.

OUTLOOK

The latest data provides general expectations for power demand in Europe’s largest markets in coming weeks and months, although further changes in business practices and government policy will continue to shape these.

With demand drops following a relatively similar pattern across the five countries, the models also provide a blueprint for countries imposing lockdowns later, depending on the severity of restrictions.

They also provide a blueprint for falling power demand in the event that future waves of the outbreak force governments to reimpose lockdown measures. It is likely though that demand would not fall so far again due to lessons learned from this first wave of the outbreak.