How will the Corona crisis affect EU sectoral electricity demand?
Unlike energy price data, there is no statistical real-time source which enables live tracking of sectoral energy consumption data. Only the overall electricity consumption is published annually. This leaves the impact of the Corona crisis on sectoral electricity demand open to speculation. Updates for annual energy statistics by Eurostat, and the respective national statistical offices, can be expected in the course of 2021. We will look at the 2017 demand structure and put forward three hypotheses on effects that the coronavirus is likely to have in each sector. Core focus are European countries most affected by the Corona crisis (end of March 2020) and Switzerland. Figure 1 shows the electricity demand by sector in TWh in 2017, before the coronavirus outbreak.
Transport
The share of electricity demand in transport lies between 2 % (UK) and 5 % (Austria). In most countries, electrified rail transport poses the largest part of electricity demand in the transport sector.
Hypothesis 1: The demand for electricity in the transport sector is likely to reduce only slightly, as a result of travel bans during the corona crisis. For example, almost all trains in Germany are still running – only with fewer passengers. Irrespective of this, changes in the transport sector are hardly noticeable in overall electricity consumption.
Households and Services
Electricity demand in the sectors households and services results from a variety of applications and strongly depends on the country.
In households, electricity demand for cooking, cooling (air conditioning and refrigerators), the use of information and communication technology (ICT) and lighting are amongst the applications with the highest electricity consumption. However, in France, electricity consumption in households is dominated by space heating, as resistance heaters are common.
The electricity consumption in the services sector of most analyzed countries is dominated by the business branches wholesale and retail trade (22 % in UK to 40 % in Spain) and hotels, cafes and restaurants (8 % in Poland to 25 % Spain). Electricity demand in these branches results predominantly from appliances such as fans, compressed air machines, machine tools, lighting and ICT [4]. Hereby, one exception is Spain, in which air conditioning is the primary consumer.
Hypothesis 2: Due to widespread quarantine in Europe, household electricity demand for the mentioned applications is likely to increase. The closure of most businesses in wholesale and retail trade and of hotels, cafes and restaurants will result in a noticeable decrease of electricity consumption, for most of the mentioned applications. The demand for ICT across all business branches in the services sector is likely to be shifted to households, while the baseload demand from servers should remain at the same level as before the coronavirus. Across both sectors, a decline in electricity consumption is expected.
Industry
Before the Corona crisis, the share of industrial electricity demand of total electricity demand in the European countries affected by the coronavirus, ranged from 27 % (France) to 48% (Belgium), with Germany and Austria at 44% and 47% respectively. Hereby, the ratio of energy-intensive (e.g. iron and steel, basic chemicals) and non-energy intensive industries (e.g. machinery, transport) is approximately 1:1, in most of the depicted countries. Exceptions are Belgium (2:1) and UK (2:5). In UK, the manufacturing industry lost importance as a result of the de-industrialization period beginning in the 1960’s and peaking under Margaret Thatcher in the 1980’s. Today, GDP and employment shares of the manufacturing sector are amongst the lowest in Northern and Central Europe [3]. In Belgium, on the other hand, the historically strong chemical industry lead to a comparably high share of GDP and employment in the energy intensive industry [4].
Hypothesis 3: The effects of the Corona crisis on global demand for goods and services is likely to leave a noticeable dent in industrial electricity consumption, both in energy intensive (EI) and non-energy intensive (NEI) industry branches. Hereby, EI industry (e.g. Austria and Italy) will respond slower compared to NEI, as processes are less employee-intensive and production plans cannot be altered as quickly. The severity of the recession induced by the coronavirus will determine the degree to which the demand for goods, and consequently the industrial demand for electricity, will sink.
We are curious to see which figures will be published in 2021, and to what extent our hypotheses prove to be true. Of course, we hope that the crisis will end as soon as possible and that the associated effects will remain manageable.
[1] Eurostat, https://ec.europa.eu/eurostat/de/web/energy/data/energy-balances
[2] FFE, Transition Towards an “All-electric World” – Developing a Merit-Order of Electrification for the German Energy System
[3] European Route of Industrial Heritage, https://www.erih.de/wie-alles-begann/industriegeschichte-europaeischer-laender/erih-europaeische-route-der-industriekultur-industriegeschichte-belgien
[4] Außenwirtschaftsportal Bayern, https://www.international.bihk.de/fileadmin/eigene_dateien/auwi_bayern/eigene_dateien/Exportberichte/Exportbericht_Gro%C3%9Fbritannien_2019.pdf
