INTERACTIVE: Demand recovery in sight on tentative lockdown ease

Author: Chetan Patel

2020/05/04

LONDON (ICIS)--The coronavirus-driven demand destruction began to show signs of easing in parts of northwest Europe as governments mull further relaxing of lockdown restrictions.

Comparatively, most central and southeastern European countries faced a further demand drop as more stringent lockdown measures were introduced late last month.

Based on the demand profile changes , as mapped by ICIS across the past eight-weeks, the total demand destruction seems to have plateaued between 10-20%; especially as countries look to relax lockdown measures.

The data suggests that the plateau occurred even with the bank holiday in week 18 which further backs signs of demand recovery.

TENTATIVE EASING

Most western European economies are beginning to enter a tentative lockdown exit strategy, with parts of Germany reopening public places and shops.

France have said they will be looking to start exiting its lockdown from 11 May, while the UK government has said that it is expecting to review its lockdown details on 10 May.

Easing German restrictions was reflected between weeks 16 and 17, which gained six percentage points against the prior week.

Due to inconsistencies with the data for last week in Germany, ICIS did not include the demand drop in this update, the data also did not consider temperature fluctuations in different years.

While a full removal of lockdown restrictions is not expected to take place in the short term, the gradual return of commercial offtake should help bolster demand.

In fact, industrial and commercial offtake showed signs of recovery in the UK on 28 April, according to data from ElectraLink, in line with the return of some DIY stores.

For example, a large portion of Spanish manufacturing sites that were forced to shut are beginning to reopen, including renewable manufacturing plants. The return of industrial offtake, albeit at reduced levels, will also help taper off the demand destruction.

For now, however, the demand drop continues in Spain, nearing 17% below its five-year average in week 18.

CENTRAL AND SOUTHEASTERN EUROPE

Out of the CEE and SEE countries analysed, only Poland has shown tangible signs of recovery in demand, which is in line with fewer coronavirus cases.

According to Alexandru Budirinca, technical solutions manager at TESLA (Europe), out of all the countries, the Czech Republic is the most advanced in terms of relaxing restrictions, however there is no clear signs of demand recovery. The situation is similar in Slovakia.

“Romania still hasn’t reached the peak of the outbreak and announced tentative measures to ease restrictions on 15 May. Again, still too early to see any movement in terms of recovery, “ he added.

BALANCING CHALLENGES

While power demand has dropped across key demand centres, the rising share of renewable generation has led to growing system balancing challenges.

Since the lockdown restrictions were put into place, wind and solar alone have accounted for 30% of the UK’s electricity generation, while nearing 45% in Germany in April.

Last week , Britain’s system operator National Grid brought forward a new commercial mechanism in anticipation of managing the low demand scenario through the summer.

This also included an emergency notification to make a modification to the grid code which would grant them access to the previously inaccessible embedded generation.

Additional reporting by Roy Manuell