French power demand recovery outstripping other countries

LONDON (ICIS)–Electricity consumption in Europe’s five largest countries was around 8% below expectations during week 26, according to ICIS models that control for temperature and calendar effects.

France was the clear outlier, with demand recovering to within 2.2GW or 4.8% of expected power use between 22-28 June.

It was the only EU country to achieve an economic expansion during the month, according to the PMI survey of executives at private-sector companies published by IHS Markit.

This suggests economic and industrial performance are more important factors to watch than lockdown policies when predicting energy demand recovery.

CORONAVIRUS DEMAND IMPACT

To establish the impact of the coronavirus on power demand, ICIS compared data from this year to the models’ expectations based on 2015-2019, over rolling seven-day periods.

The results indicated demand across Europe’s five largest countries was on average 3.2GW or 8.1% below expectations over week 26.

This was in line with the reduction through most of June, although the decrease was slightly greater in the first week of the month.

France was the only EU economy to return to growth in June, according to the PMI survey.

Economists praised the country for a recovery in internal demand fuelling manufacturing.

Some French businesses have pivoted to producing essential goods such as face masks, and the government has stepped in to keep operations running in hard-hit sectors such as aerospace engineering.

The country’s service sector reopened in every region on 15 June and schools fully reopened on 22 June.

France’s state of health emergency is due to end on 11 July, suggesting that demand could rise further from then.

The country’s demand started to recover as early as March when factories reopened at least partially even as lockdown orders remained in place.

The French approach could be a blueprint for economic and electricity demand recovery more widely.

Italy and Germany have larger manufacturing sectors than France, but rely on exports amid a pandemic-led collapse in global demand.

Reopening businesses lifted German consumption to a two-month high relative to the model’s expectations in early June, but since then factories have shut and parts of the country have gone back into lockdown after cases spiked at a meatpacking plant.

THE MODELS

ICIS used multiple regressions to find the closest statistical fit between daily averages for electricity demand, temperature and calendar effects in Italy, France, Germany, Spain and Britain between March and June 2015-2019.

ICIS kept a second squared temperature variable added in May to account for a curved relationship whereby demand rises during greater heat or cold.

Weekday and yearly variables appeared in prior model runs, but the others are all new for June:

• Bridge is a binary variable controlling for Mondays prior to and Fridays following a public holiday, where demand is lower than on other weekdays.

• Sunset time correlated more closely with a seasonal drop in demand than either total sunlight hours or the escalating dummy variable from prior model runs. After converting from 24 hour clock times, the value increases from 0.74 on 1 March to 0.89 during the summer solstice in late June.

• School is a numerical variable set to zero when all of a country’s schools are open, one when all are closed, and variations between the two to account for regional differences in the school calendar. Demand drops when schools are on holiday.

• The exception to the above is summer holidays in Spain and Italy, as these countries’ populations swell due to arrival of tourists. ICIS therefore controlled for summer holidays in Spain and Italy separately.

The additions increased the explanatory power of four of the five models. These explained between 80-97% of the variation in power demand across the sample.