Many European governments reacted to the COVID-19 pandemic by instituting lockdowns. Regional specifics varied, but residents and citizens were generally ordered to stay and work from home, when possible. Worldwide, nearly 4.2 billion were under some form of lockdown. Simulatainusly, the pandemic came with a degree of uncertainty that translated into an economic slowdown. As consumers spent less, companies’ energy demands fell. So what can businesses learn from COVID-19’s impact on electricity markets and what should they do in the future?
The effects:
Temporary decrease in demand
While household energy use did increase, economic slowdown and halts cut the energy use of the commercial and industrial sectors. In some sectors, the demand fell to historic lows. For example, the 2019 EU-wide electricity consumption was 207 TWh in April. The following year, by April, EU-wide demand had fallen to 181 TWh. Electricity providers had to grapple with the reality that energy-intensive factories and facilities were closed or working at a limited capacity. Overall, demand during workdays fell by 1% to 9% on weekdays and 1% and 13% on weekends. This also reflects the regional differences in consumption. Colder areas will always use more energy for heating, and countries with lighter lockdowns saw more business activity.
Negative electricity prices
Covid and the advent of renewable energy had a cumulative, negative impact on electricity prices in the spring of 2020. Some regional differences did manifest. For example, France had close intra-day and day-ahead prices. This is likely a result of France’s energy mostly coming from nuclear power plants. Nuclear power is relatively consistent when compared to other sources which contributed to some price stability. Similarly, German hydroelectric power provided closer intra-day and day-ahead prices. Locations without such power sources experienced greater price variations and fluctuations. By January of 2021, prices had increased again. It is worth noting that volume of trade on the intera-day market did not significantly decrease. In fact, due to a sizable increase in renewable generation during 2020, more and more electricity was traded. In general, price volatility has increased the demand for more accurate price forecasts.
Other behavioral changes
While lockdowns have ended in the EU, work-from-home or a hybrid work model has remained. As a result, peak energy use shifted to evenings. Employees who worked from home were more likely to sleep in and start late. One study noted that in 2020, weekday energy use resembled weekend energy use in 2019. As industrial activity returned in 2021, energy consumption levels have returned to pre-pandemic levels.
What should companies do?
Most research on the impact of COVID-19 on the European electricity markets noted some regional differences. The main factor, country to country, was the severity of lockdowns. In countries where lockdowns were particularly long or intense, electricity usage fell by about 15%. Countries like Sweden saw a lesser decrease in electricity usage. This is all to say that energy markets are deeply complex. Uncertainty mixed with lockdowns during COVID-19 to decrease demand. The war in Ukraine brings uncertainty and rising energy costs in much of the EU. As a result, both companies and energy providers need more robust crisis plans. There are technological solutions available as well. AI energy prediction algorithms could also help a company forecast future energy prices. Fed regular data from smart meters, together with the massive amounts of energy price figures, an AI can extrapolate future price variants. Existing AI tools have the ability to create models of a building or facility. The system will develop a plan for the next 24 hours based on a variety of data. Read more about AI in energy price and consumption prediction here.
What can businesses learn?
The world is in the midst of a shift to renewable and sustainable energy. Geopolitical events also drive uncertainty, leading to unpredictability in the market. There is no guarantee another crisis will not manifest in the near future. Companies need to find ways to insure themselves against risk. Energy efficiency is one such method. By cutting power costs in general, a company insulates itself from future cost fluctuations. So how to go about reducing power consumption? Businesses should learn from peers who have embraced modern techniques and technology. The Net Zero Food & Beverage Forum: Energy Efficiency and Decarbonisation conference, held from the 16th to 17th of February is an ideal opportunity. Industry leaders and innovators will gather in Berlin to discuss and exchange ideas and experiences with managing energy consumption. Visit future-bridge.eu or follow us on our social media to track other energy use and decarbonization events.