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The economic perspectives and the possible new outbreaks of COVID-19 will condition the recovery of the energy markets

AleaSoft, June 16, 2020. Europe began to ease the measures taken to curb the coronavirus after the worst part appears to have passed. Due to this, the demand and the prices of the energy markets started to recover, although without reaching the levels of the same period of 2019. The uncertainty continues as new outbreaks are not ruled out and the economic outlook is very pessimistic. These topics and their impact on the markets and on the project financing will be addressed in a new webinar.

European electricity markets

With the arrival of the coronavirus on the European continent, measures were taken to control its spread, including the closure of schools, shops, borders, the confinement of the population, among others. These measures caused a drop in electricity demand that in some cases reached levels close to those of the beginning of the century. Europe is currently immersed in the process of de‑escalation of these measures thanks to the fact that the virus is being less aggressive, there are less hospital admissions and deaths. Although the electricity demand begins to recover, it is still lower than in the same period of last year. In the summer months, the demand is expected to continue recovering, although taking into account the economic crisis caused by the pandemic, it will not return to last year’s levels.

The heat will not completely eliminate the coronavirus and the cold could reactivate the epidemic and the virulence. The greatest uncertainty is now in September and October when it is possible for outbreaks of the disease to occur due to the arrival of the cold, the opening of schools and universities and the return to the new normality.

Variation of electricity demand of 2020 compared to 2019.
Source: AleaSoft using data from TERNA, REE, RTE, ENTSO-E, National Grid, REN and ELIA.

On the other hand, the electricity markets prices started to drop since the last quarter of 2018 due to the drop in gas prices. The collapse in this fuel prices worsened during the COVID‑19 crisis, reaching lows of at least the last eleven years. The of CO2 emission rights prices also fell in this period to values close to €15/t. In this scenario of lower electricity demand and low gas and CO2 prices, the electricity markets prices came to stand below €20/MWh. At the beginning of June they started to recover and most of them are already above €30/MWh. The evolution of the coming months will be conditioned by the effects on the electricity demand and gas and CO2 prices due to the coronacrisis and a possible outbreak of the coronavirus.

Economic perspectives

The economic perspectives for 2020 corresponding to the OECD report of June outline a scenario of falls in GDP of over 7% across Europe, and that, in the event of a second outbreak of the epidemic, they are above 9%. The forecasting for Spain is the most pessimistic, going from ‑11.1%, if a second outbreak does not occur, to ‑14.4%, if it occurred. In this same environment is the forecasting of the Bank of Spain, which predicts a drop of 9% if there are no outbreaks, and up to 15.1% in the event that there were.

New webinar

Since the coronavirus crisis began, a series of webinars to analyse the evolution of the energy markets during this period was carried out at AleaSoft. In these webinars, the issue of the financing of renewable energy projects in this context of so much uncertainty was also discussed. Taking into account the changing nature of the situation, on June 25 the third part of the webinar “Influence of coronavirus on electricity demand and the European electricity markets (III)” will be held. The speakers on this occasion will be Pablo Otín, CEO and co‑founder, at Powertis, Miguel Ángel Amores, Manager of Renewable Energy, at Triodos Bank and Oriol Saltó, Manager of Data Analysis and Modelling at AleaSoft.

Source: AleaSoft Energy Forecasting.

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