Electricity demand significantly decreased all across Europe as a consequence of the Covid-19 pandemic, the subsequent preventive measures and economic recession. High decreases were observed in Italy, Spain and the United Kingdom, with drops in demand of around 6% – significantly above the average 4 to 5% drop for the region as a whole.

The uncertain environment created by the outbreak of Covid-19 also affected emission allowance prices in the EU emissions trading system. After a long period of prices below EUR 10/tCO₂-eq in the years 2012 to 2017, prices reached a peak of around EUR 30/tCO₂-eq in July and August 2019. With the increasing visibility of the scale of the global pandemic, at times prices dropped below EUR 15/tCO₂-eq in March, April and May – before reaching EUR 30/tCO₂-eq again in September.

Electricity supply from renewable energy has continued to gain a larger market share across Europe. Despite falling demand, especially in the second quarter of the year, and record high renewable levels relative to demand, integration issues were scarce. On average, renewables in Europe are expected to provide around 42% of all generation in 2020, a significant increase from the 37% in 2019.

Coal-fired generation, by contrast, is experiencing the largest decrease, down around three percentage points to provide around 15% of total generation in 2020.

In September 2020 the European Commission proposed to raise climate ambitions and cut emissions by 55% by 2030 (compared to 1990). This follows the 2050 climate-neutrality target agreed by EU leaders at the end of 2019.

European nuclear power generation fell by close to 12% (or 86 TWh) y-o-y in the first eleven months of 2020, to its lowest output in at least 20 years. The steep drop has been driven by a number of factors, including optimisation of fuel usage amid reduced electricity demand, plant retirement, rescheduling of maintenance work and unexpected outages caused by low river levels. Most of the additional market space has been captured by gas-fired power plants, which benefited from low gas prices and the sharp recovery in carbon prices, putting them in a more competitive position vis-à-vis coal- and lignite-fired generation.

France alone accounted for over half of the net drop, with nuclear generation decreasing by 16% (or 45 TWh) y-o-y. In addition to the closure of the Fessenheim 1 and 2 nuclear reactors in February and June 2020 respectively, the maintenance schedule of multiple reactors has been rescheduled as a consequence of the Covid-19 outbreak. The outages at the Flamanville 1 and 2 and Paluel 2 nuclear reactors – offline since September 2019, January 2019 and October 2019 respectively – were all extended by several months and are due back online in late 2020.

As a consequence of the steep fall in nuclear power output and reduced electricity demand, France’s net electricity exports plummeted by over 22% (or 12 TWh) y-o-y in the first eleven months of 2020. Net exports to Spain fell by over 40% (or 4 TWh) and more than halved to Belgium (down by 1.6 TWh). In September France’s electricity imports surpassed exports for the first time since November 2017. France returned to net export status in October and export flows rose significantly above last year’s levels in November, amidst improving nuclear availability.

Similar to France, the Belgian nuclear fleet faced extended outages. The restart of the Tihange 1 reactor was delayed from July to the end of the year, due to a failure in a cooling water reservoir tank. This coincided with the planned maintenance of Tihange 3 from June until mid-October, altogether resulting in Belgian nuclear output falling by 22% (or 8 TWh) y-o-y.

Nuclear generation in Sweden decreased by over 27% (or 16 TWh) y-o-y in the first eleven months of 2020. This was partly due to the decommissioning of the Ringhals 2 nuclear reactor at the end of 2019. In addition, weak electricity prices on subdued demand combined with ample hydro availability (up 14% y-o-y) further weighed on nuclear output. In March 2020, due to low electricity prices, reactor Ringhals 1 was stopped temporarily and in April Ringhals 3 was also taken offline because of low prices and reduced demand due to the Covid-19 crisis.

In the United Kingdom several outages were extended over the summer. Moreover, an agreement was reached between National Grid ESO and EDF Energy to reduce the output from the Sizewell B power station until the end of September to make it easier to manage the system with low demand and relatively high levels of VRE. Altogether, nuclear power output fell by 10% (close to 4 TWh) during the first eleven month of the year. In Germany nuclear output was down by 15% (almost 10 TWh) during the same period of the year, primarily due to the closure of the Phillipsburg 2 reactor at the end of 2019.

European nuclear power generation started to recover in October, with the y-o-y decrease moderating in November to a fall of 3% on rising nuclear availability.

In 2019 electricity demand in Spain declined by 1.6%, or 2.5% after weather and calendar adjustment, despite the country’s GDP growth of 2%, mainly due to lower industrial demand. In 2020 the drop in electricity demand accelerated, caused by Covid-19-related lockdowns in the spring and later in the year, as well as the slow economic recovery afterwards. In the first three quarters of 2020 electricity demand declined by 6.7%, or 6.9% when weather and calendar adjusted.

Renewables expansion slowed in 2020 compared to 2019. In the full 12 months of 2019 solar PV capacity increased by almost 5 GW (up 90%) and wind capacity grew by around 2.4 GW (up 10%). In the first three quarters of 2020 only just over 1 GW of PV and 650 MW of wind were commissioned. Given Spain’s endowment of good wind and solar resources, and the government’s forthcoming renewable capacity auctions – which will improve project bankability by reducing risk – an acceleration of renewable capacity additions is expected in the coming years.

Electricity generated by natural gas combined-cycle plants had already become cheaper than coal in 2019 as a result of low gas and robust CO₂ prices. This boosted CCGT output, which increased by 84% in 2019, and led to a decline in coal power generation of 70%, down to levels not seen since the first oil shock in 1973-74.

Coal-fired generation has virtually disappeared in 2020. Stagnating electricity demand, increasing renewable output, robust CO₂ prices and stable gas prices, together with investments required to comply with more stringent European environmental standards, led to the retirement of 4.8 GW of coal capacity at the end of June.

The prospect for CCGTs is also challenging – not least due to the extensive availability of capacity. Despite the virtual elimination of coal-fired generation, average working hours of CCGTs in 2019 were around 2 100 hours (an average capacity factor of 24%). Lower electricity demand and higher renewable generation in 2020 might push working hours below 2 000.

Italy, one of the European countries hit hardest by Covid-19, introduced its first quarantine on 22 February in 11 municipalities of the Lombardy region. By 9 March the whole of Italy was under lockdown, with nearly all commercial activity suspended two days later, except for supermarkets and pharmacies. On 21 March the Italian government closed all non-essential businesses and industries, and restricted the movement of people. Later on in May restrictions were gradually lifted, and on 3 June freedom of movement across regions and other European countries was restored.

With the drop in electricity demand, imports also decreased: whereas in 2018 and 2019 net monthly imports never fell below 2.2 TWh, they dropped in April and June 2020 to 0.8 TWh and 0.5 TWh respectively, driven by exports more than doubling in the second quarter of 2020 compared to the same period in 2019.

In recent years electricity demand has been rather stable in Italy. However, demand significantly dropped in 2020: in the first half of the year, demand was down by 9% compared to the corresponding period in 2019 – for the full year, a drop of around 6% is estimated. Electricity demand finally started reaching 2019 values again in August and eventually stabilised in September with industrial electricity consumption recovering. In a monitored industry sample, consumption in oil refineries and coke works increased by 42.4% in September, paper mills by 29.6% and companies producing construction materials by 9.7% compared to previous months.

With significant changes in demand came significant changes in supply. Natural gas has accounted for the majority of the reduction in power generation, with lower imports accounting for most of the rest. Slightly lower coal demand was offset by higher renewables output, mainly from hydro. 

France is among the European countries to see a higher number of coronavirus cases and put tight measures in place accordingly, ranging from the closing of all non-essential businesses to restrictions on movement outside the home. After lifting many of these restrictions during the summer, renewed lockdown measures were introduced in the autumn. In total, electricity demand in France is estimated to drop by about 5% in 2020, with the largest fall of around 17% in April compared to the same month in 2019.

As in other countries, the drop in demand coincided with higher renewable generation, putting pressure on supplies from other sources. The majority of thermal generation had to be halted – gas- and coal-fired power generation decreased by 75% between April and May, a decline of around 2.7 TWh. As this was insufficient to compensate for the reduction in demand of around 10 TWh, and export opportunities were limited due to low demand in neighbouring countries, nuclear power generation also fell. Overall, nuclear generation is expected to decrease by around 16% in 2020, due to the combined effect of the decommissioning of the two units at the Fessenheim plant in February and June, comprehensive maintenance works and lower export demand. 

The United Kingdom was heavily affected by the Covid-19 pandemic in 2020. After a mild decrease of demand in the first quarter (less than 1% year-on-year), demand dropped by 12% in the second quarter. With household consumption almost stable (down 1.7%), the decline was primarily due to a 17% drop in the industrial sector and 20% in the commercial and other sectors. Higher renewable output and lower demand meant that the share of renewables in the generation mix rose to 47% in the second quarter, a record high.

The overall fall in demand in the second quarter was followed by a steady recovery in the third quarter, which has since been halted by fresh restrictions in the final quarter of the year. It is estimated that UK demand will fall by around 6% for the entire year.

The reduction in demand combined with higher renewables output (up around 10%) has meant lower generation from fossil fuels. Gas-fired generation has borne the brunt of this reduction, while nuclear power is down 10%. In the second quarter of the year, coal accounted for only 0.5% of total generation – a record low. Between March and June coal was not used at all in Great Britain for 67 consecutive days. 

Germany imposed milder restrictions on the movement of people than other large European countries. As the number of Covid-19 cases and deaths per capita rank at the lower end, no nationwide lockdown was put in place. Nonetheless, starting in the second half of March a range of restrictions were introduced, such as a ban on public gatherings of more than two people and the closing of restaurants, hair salons and schools.

Despite milder measures, the overall 5% drop in electricity demand anticipated for 2020 does not differ greatly from other large European countries. This is due to a significant slowdown in industrial activity, which was responsible for around 45% of total electricity demand in 2019.

Renewables continue to grow. Onshore wind is now the largest source of electricity generation in Germany, exceeding lignite (which had been top since 2007) for the first time. After shutting down the nuclear unit Philippsburg 2 (1.5 GW) at the end of 2019, six nuclear reactors remain in operation in Germany (due to be decommissioned in two steps at the end of 2021 and 2022 with three retirements per year). For the full year, despite the estimated drop in nuclear generation (down around 15%), the sum of low-carbon generation (i.e. nuclear and renewables) could slightly increase due to the growth of renewable energy. It is anticipated to account for about 56% of total electricity generation (up about 4 percentage points).

Gas was able to hold its share of electricity generation as the fall in demand and rise of renewables were reflected in lower production from coal combustion – both hard coal and lignite declined as low gas prices and high carbon prices favoured gas until late in quarter three.

Germany put a new law into place in July 2020 that stipulates the complete national phasing out of coal in 2038 at the latest, and potentially in 2035 if certain criteria are met. To facilitate the roughly linear capacity reduction path, annual auctions are being held to determine cost-efficient decommissioning until 2027. The first auction for 4 GW ended in September of this year.