Impact of Coronavirus on European energy markets - Weekly tracker for 8th April 2020 - Aurora ...
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Impact of Coronavirus on European energy markets
Weekly tracker for 8th April 2020
© 2018 Aurora Energy Research Limited. All rights reserved.
08/04/2020
Executive Summary
▪ The number of reported COVID-19 cases reached nearly 600,000 across Europe (as of 6th April). Spain
now has the highest number of reported cases in Europe, and highest number per million of population.
▪ Gas price futures continued to fall in the last week with NBP Q2-2020 contracts falling by 3p/therm.
Gas consumption trended downwards during March, although at levels which are normal for this time of
year. Gas storage inventories are significantly higher than usual for this time of year.
▪ EUA Carbon prices rebounded over the last week, reaching over €20/tonne on the 6th April, as markets
rallied on the news of the slowing rate of COVID infections in some countries
▪ Power demand has continued to fall in many European countries – with Italy, Spain and the
Netherlands all recording more than a 15% reduction in demand in the week commencing 30th March,
compared to this time last year. The demand decline has extended in Italy, France, Spain and GB, and
Germany is now also seeing a small reduction in power demand. GB power demand has fallen by nearly
5GW on average during working hours, since social distancing measures were tightened on the 23rd
March.
▪ European power prices have fallen by more than 30% since the start of the COVID lockdown. Over the
last week wholesale prices fell further in Spain, GB and Ireland, but recovered in France, Germany and
Netherlands. GB wholesale power prices fell to a decade-long low in March 2020 on the back of low
commodity prices and weak demand. Over the past week, GB power futures fell for Q2-2020 contracts,
but increased from Winter 2020/21 contracts onwards.
2About Aurora Aurora provides data-driven intelligence for the global energy transformation Source: Aurora Energy Research 3
Aurora continues to help you navigate the impact of
COVID-19 on European energy markets
How do our market intelligence subscribers stay up-to-date on COVID-19 implications?
▪ Power Market Forecast reports incorporating Apr May Jun
COVID impacts on commodities and demand
▪ Group Meetings will explore sensitivitieson Group Meeting
GB Flex DE RES GB Power FR DE Power
the impact of COVID on European power
markets and asset economics
▪ Podcasts with industry leaders
Market Forecast
▪ Coronavirus tracker email assessing the impact Report
on European power and commodities markets
COVID-19 Special report Consultancy & Bespoke Analytics
▪ Comprehensive exploration of the range of ▪ Bespoke scenarios for business planning and
scenarios from the fallout of COVID-19 transaction support
▪ Impact on power prices, spreads, viability of ▪ Stress testing portfolios
investments, carbon emissions
▪ Defensive/opportunistic portfolio optimisation
▪ Differences in impact amongst technologies
▪ Board/Management briefing
▪ Implications on asset values vs stock market
For more information contact Felix.Chow@Auroraer.com for GB, Ireland, France and Iberia
and Hanns.Koenig@Auroraer.com for Germany, Poland and BeNeLux
Source: Aurora Energy Research 4Number of COVID-19 cases in Spain has surpassed Italy,
with nearly 600,000 cases across Europe
COVID-19 infections, COVID-19 infections,
Reported cases per 1 million population Number of reported cases1
Spain 2,888 1,000,000
EU-27 + UK
Spain
Italy 2,192
100,000 Italy
France 1,422 Germany
France
10,000
Germany 1,208 UK
Netherlands
EU27+UK 1,121 1,000 Ireland
Netherlands 1,097 Poland
100
Ireland 1,011
UK 760 10
Poland 117
1
2nd 9th 16th 23rd 30th 6th
March March March March March April
1. Chart is in log scale
Sources: EDCD, Worldometer 5Contents
1. COVID-19 impact on European gas and carbon markets
2. COVID-19 impact on European power markets
3. Deep dive on GB power market
6Gas futures continued to fall in the last week with NBP
Q2-2020 contracts falling by 3p/therm
Average monthly Average monthly
NBP gas futures,1 NBP gas futures, ▪ The gas market already
pence / therm €/MWh exhibited low prices at the
start of 2020 as a result of a
65 25 mild winter combined with
LNG over-supply
60
55 ▪ Gas futures have continued
20 to fall in the last week,
50
largely due to COVID-19
45 impact, with the front part of
40 15 the curve seeing the greatest
35 decline
30 ▪ NBP futures decreased by
25 10 5% on average between
20 2020 and 2025 compared to
the beginning of March as
15 the COVID-19 outbreak
5
10 disrupted economic activity
5 and fuelled uncertainty over
future demand
0 0
Jan-20 Jan-21 Jan-22 Jan-23 Jan-24 Jan-25 ▪ This creates significant credit
/ cashflow risk for parties
06/04/2020 23/03/2020 09/03/2020 that have already contracted
30/03/2020 16/03/2020 02/03/2020 for 2020 or beyond
Note: 1. Futures are a rolling 7 day average.
Sources: Aurora Energy Research, Eikon 7North West European gas consumption trended
downwards during March, but at seasonally normal levels
Monthly NW Europe gas consumption, Daily NW Europe gas consumption,
bcm mcm
40 800
35 700
30 600
25 500
20 400
15 300
10 200
5 100
0 0
Mar- May- Jul- Sep- Nov- Jan- Mar- 1st 8th 15th 22nd 29th 5th
19 19 19 19 19 20 20 March March March March March April
Total Consumption Min-max envelope1
Notes: 1) Envelopes are calculated by taking the maximum and minimum monthly values since 2014.
Sources: IEA, Aurora Energy Research EOS 8NW European gas storage inventory is at a high for this
time of year – exceeding 5-year trailing maximum
Monthly NW Europe gas storage inventory, Daily NW Europe gas storage inventory,
bcm bcm
60 60
55 55
50 50
45 45
40 40
35 35
30 30
25 25
20 20
15 15
10 10
5 5
0 0
Mar- May- Jul- Sep- Nov- Jan- Mar- 1st 8th 15th 22nd 29th 5th
19 19 19 19 19 20 20 March March March March March April
Total inventory Min-max envelope2,3
Notes: 1) Storage data is based on net daily flows. 2) Envelopes are calculated by taking the maximum and minimum monthly values from October 2014 until February 2019. 3) Envelopes are
calculated by taking the maximum and minimum daily values from March 2015 until March 2019.
Sources: Aurora Energy Research EOS 9EU ETS prices fell during March but have recovered to
above €20/tonne over the past week as markets rally
Spot EUA price,
Lower Aviation demand: Global flight volumes
€/tonne
fell by 2/3rds during March. Easyjet grounded
25 its entire fleet. UK recently cancelled auction
-35% for EUA Aviation allowances
Lower Industrial demand: Factory closures due
Downward
to COVID restrictions; reduced demand for
pressure on
+31% metals and cement due to reduced
price in short
manufacturing and construction activity
20 term
Lower Power market demand: Lower power
demand (explored in next slides) reducing
permit demand from coal and gas generators
15 ETS reforms: European Commission remains
committed to tighten ETS as part of Green
Deal, but looks likely to be delayed; Poland
Upward challenging logic of tightening ETS at this time
pressure on
price in medium
term
MSR Mechanism: will gradually remove excess
10 permits from the market.
2- 9- 16- 23- 30- 6-
Mar Mar Mar Mar Mar Apr
Sources: Aurora Energy Research, Eikon 10Contents
1. Impact on European gas and carbon markets
2. Impact on European power markets
3. Deep dive on GB power market
11Power demand has fallen more than 15% in Italy, Spain
and Netherlands since start of COVID-19 lockdown
Daily average power demand in 2020, Change in demand versus
TW same week last year:
Lockdown introduced
11 w.c. 23 w.c. 30
10 March March
9 Germany DE: -3% -5%
France
8
FR: -8% -11%
7
UK: -5% -12%
6
UK
5 ES: -7% -19%
Italy
4
Spain IT: -23% -26%
3 Poland
PL: -8% -6%
2
Netherlands
1 NL: -11% -22%
Ireland
0
w.c. 2 Mar w.c. 9 Mar w.c. 16 Mar w.c. 23 Mar w.c. 30 Mar IE: -3% -10%
1) We analyse demand decline between 4th March week 2019 and 4th March week 2020, as well as 1st March week 2020 and 4th March week 2020
Sources: ENTSO-E, Aurora Energy Research 12Daytime demand has fallen sharply in Italy, Spain and GB;
Germany has started to see a demand impact in the last week
COVID-19 cases1 2,192 2,888 1,208 760
1,422
Per 1 million
population
6 4 4 3 3
22 36 31 25 35
Power demand 32 31 27
31 31
by end user2 40 28 33 45 31
Other Household Commercial Industrial
Italian daytime Demand has Germany has started to GB demand has
demand has fallen fallen across the see demand decline fallen sharply
further in last week day in Spain during working hours during work hours
Hourly load 110 110 110 110 110
during
sample
100 100 100 100 100
weeks 90 90 90 90 90
(% of same
week in 80 80 80 80 80
2019) 70 70 70 70 70
60 60 60 60 60
04:00
08:00
12:00
16:00
20:00
04:00
08:00
12:00
16:00
20:00
04:00
08:00
12:00
16:00
20:00
04:00
08:00
12:00
16:00
20:00
04:00
08:00
12:00
16:00
20:00
1) Status 30 March 2020 2) Data for 2018 calendar year w.c. 30 March w.c. 23 March
Sources: ENTSO-E, Eurostat, Aurora Energy Research 13Day-ahead power prices have fallen by 30-40% in many
EU countries since COVID-19 lockdown
Weekly average day-ahead power prices in 2020, Change in prices versus
EUR/MWh previous week:
50
w.c. 23 w.c. 30
-32% March March
45
DE: -21% +10%
40
FR: -21% +8%
35 UK: -21% -5%
Poland
30 ES: -9% -33%
UK
Italy
IT: -13% -3%
25 Ireland
Netherlands
PL: -8% -2%
Spain
20
Germany
NL: -27% +13%
France
15
w.c. 24 w.c. 2 Mar w.c. 9 Mar w.c. 16 w.c. 23 w.c. 30 IE: -14% -22%
Feb Mar Mar Mar
Sources: ENTSO-E, Aurora Energy Research 14Contents
1. Impact on European gas and carbon markets
2. Impact on European power markets
3. Deep dive on GB power market
15GB power demand has fallen by almost 4 GW on average
since social distancing was introduced
Demand during March-April 2020
GB Daily demand1,
GW March 2019 avg. W/c 2nd Mar W/c 16th Mar W/c 30th Mar
W/c 9th Mar W/c 23rd Mar
50
45
40
35
30
25
20
Monday Tuesday Wednesday Thursday Friday Saturday Sunday
▪ The UK Government announcement on the 16th of March to “work from home if possible” had minimal impact on
demand compared to the weeks before
▪ Government imposed social distancing measures from Monday 23rd March including the closure of non-essential shops.
Demand has fallen by 4.9 GW during typical working hours (9am – 5pm)
1. Includes both transmission and embedded demand.
Sources: Aurora Energy Research and Elexon. 16GB power prices were already at a decade-low in February and fell further in March 2020 Average APX spot sprice1, Average monthly spot price Annual average spot price £/MWh 70 65 60 55 50 45 40 35 -33% 30 25 20 Mar- Mar- Mar- Mar- Mar- Mar- Mar- Mar- Mar- Mar- Mar- 10 11 12 13 14 15 16 17 18 19 20 1. Average monthly APX is the average over the month of the volume-weighted reference prices for each half-hour interval. Sources: Aurora Energy Research, Thomson Reuters 17
GB wholesale prices were negative for over 7 hours on
Sunday 5th April due to low demand and high wind output
GB power market activity on Sunday 5th April 2020
Generation by fuel type1, GW
Peaking/other
40
Pumped storage
Interconnector
30
Coal
CCGT
20 Solar
Wind
10 Other renewables
Nuclear
0 Demand on Sunday
Power prices, £/MWh 7th April 2019
60
Day ahead price
40
Intraday price
20 System price
0
-20
-40
-60 Prices were also negative in interconnected
countries (e.g. France, Netherlands
-80
12am 4am 8am 12pm 4pm 8pm 12am
1. Actual generation after Balancing Mechanism actions. Excluding non-renewable distributed generation.
Sources: Elexon, Aurora Energy Research 18Over the past week GB power futures have weakened
further for Q2-2020 delivery, but increased thereafter
GB monthly wholesale prices,
£/MWh
70 Futures taken
Historical
4-Dec 2019
60
3-Jan 2020
3-Feb 2020
50 05-Mar 2020
30-Mar 2020
40 06-Apr 2020
30
GB power futures In the last week, GB
for Q2 2020 fell power futures for Winter
20 by £1/MWh in last 2020/21 and beyond
week increased by £0.7/MWh
10
Mar- Mar- Mar- Mar- Mar- Mar-
18 19 20 21 22 23
▪ The impact of Coronavirus has been to depress GB power futures across the curve, with greatest impact on
shorter term prices in 2020, moving the market into contango.
▪ Over the past week (comparing 6th April to 30th March) futures declined by ~£1/MWh for Q2 2020 delivery,
whilst contracts for Winter 2020/21 and beyond increased by an average of £0.7/MWh
▪ This creates significant credit / cashflow risk for parties that have already contracted for 2020 or beyond
Sources: Aurora Energy Research, Thomson Reuters 19Report details and disclaimer
Publication Prepared by Approved by
COVID Impact Katharina Doyle (Katharina.doyle@auroraer.com) Richard Howard (Richard.howard@auroraer.com)
weekly tracker 9th Nayoung Kim (Nayoung.Kim@auroraer.com)
April 2020 Asgeir Heimisson (Asgeir.Heimisson@auroraer.com)
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