Power returns to Germany and Italy as business slowly starts

London — Italy and Germany showed signs that they’re beginning to consume more electricity, suggesting economic activity may be starting to increase in some corners of Europe hardest hit by the coronavirus.

In France and Spain, power use was steady in the past week, while Britain suffered a further slump. Those findings from grid operators shed light on how lockdowns to contain the Covid-19 crisis are affecting Europe’s economy.

Confirming those tentative indications of power demand from some of the biggest economies relies on the virus petering out in the coming months, allowing governments to restart businesses they ordered shut.

“Countries will most likely return to previous habits around energy use as policymakers strive to return economies to normality following the severe health and economic shock,” according to DBRS Ratings.

European power and natural gas prices could take years to recover, according to Aurora Energy Research. The consultant estimates it could take four years for power prices and as long as eight years for natural gas to recover in a scenario in which lockdowns last into the fourth quarter.

Full-year demand that’s as much as 20% lower and depressed prices will dent profits for generators across Europe and cause higher-cost coal and lignite stations to stay closed, according to Elchin Mammadov, an analyst at Bloomberg Industries.

While the demand picture looks more promising than a week ago, a comparison to last year shows the extent of the damage Covid-19 has had on industry.

Here is a list of some of the effects that grid and energy companies in the region are reporting:

Italy

Italy will present a plan this week to ease its lockdown starting May 4, joining Germany, France and Austria in pursuing a gradual return to normality as coronavirus infection rates fall.

Power consumption at the morning peak rose 10% on Wednesday compared to a week ago, according to data from the network operator Terna. The country’s drop in power demand has been one of the most stark in Europe, falling 26% last week compared with a year earlier, according to Entsoe, the grid industry group.

Starting in early March, Italy closed all non-essential businesses, banned movements within the country, and confined people to their homes except for buying food, going to work and seeking medical help.

Germany

Germany has begun to lift its coronavirus containment measures, allowing smaller shops and schools to open.

Electricity use measured at midday rose for a third week on Wednesday, rising 2.6% from a week earlier, according to data from energy regulator Bundesnetzagentur. Demand has gained 5.7% from two weeks ago, the data shows.

Power demand in Germany has been less affected than other regional nations, with use 9.9% lower last week compared with a year earlier. The nation’s most stringent measures started later than elsewhere, finished sooner and look less damaging than in many other European countries, according to Bloomberg Economics.

Spain

Spain’s steep decline in electricity demand shows signs of hitting bottom. There’s been little change in the afternoon peak during the last three weeks compared to the week before, the grid operator Red Eléctrica Corporacion said on Wednesday.

The nation’s new cases of the virus look to be stabilising too, with just a small increase in the number of new infections. Prime Minister Pedro Sànchez’s government has said that Spain is past the peak of the pandemic, while cautioning that the process of easing lockdown restrictions will be gradual and continue for at least two more weeks.

Demand was down 12% from a year earlier, according to Entsoe data. That measure has narrowed from its widest point last week, when there was a 25% drop. That was one of the biggest year-on-year slumps in Europe.

UK

UK power consumption on Wednesday fell 3.2% during the morning peak at 9am from a week earlier, data from National Grid shows. The decline comes after signs last week that the slump may be starting to ease in Britain, with overall consumption little changed. Electricity use was 29% lower last week compared to the same period a year earlier, and the grid operator has warned it expects to see an effect for months to come.

It’s not yet clear when the UK plans to end its lockdown measures. Closing schools, shops and businesses has come with a heavy economic price, and pressure is building on the government to relax the confinement.

France

In France, the electricity consumption slump looks to have stabilised with use little changed on Wednesday from a week earlier. Demand has slumped 22% from a year earlier, Entsoe data shows.

Lower demand has forced Électricité de France to cut output from its nuclear power plants. The utility extended ongoing halts at 11 of its reactors on Wednesday to conserve fuel for winter when prices and demand is higher.

France has been in lockdown for five weeks — outdoor exercise is banned during the day and anyone leaving their home is required to fill out a government form stating the purpose of their trip. These measures will remain in place until at least May 11.

Bloomberg