The impact of COVID-19 on European power markets

The introduction of lockdown measures has had a profound impact on economic activity that is reflected by the current fundamentals in power markets. Major European power markets – including France, Germany, Belgium, Italy, Spain, and Great Britain have taken a hit since lockdown measures came into force.

Electricity demand
Across European markets, electricity demand has plunged. The 2020 demand curve fell out of the historical range after lockdown measures came into force. While the fall of electricity demand was mainly driven by a dramatic slowdown in industrial and commercial sectors, a deviation from “normal” consumption patterns and a change in daily demand profile shapes have revealed some changes in domestic consumption behaviours and habits.

Electricity wholesale prices
Falling commodity prices coinciding with high renewable generation, residual demand in electricity markets has fallen to a new low, and electricity prices across major European markets have slumped in March and April 2020. We have observed more frequent periods of negative prices and increasing volatility across European electricity markets.

Thermal generation
COVID-19 lockdown measures have exacerbated market positions of thermal generation, leading to a further reduction of operating hours and market revenue. Facing higher uncertainty, many utilities would have had to significantly alter their hedging positions, while trying to estimate future demand recovery.