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Electricity demand in Britain dropped by a tenth last week after the UK government imposed a lockdown to curb the spread of coronavirus.
As businesses closed, the decline in average daytime demand also led to a fall in wholesale electricity prices as renewables such as wind and solar — which produce electricity very cheaply once built — now provide a greater proportion of the generation mix at the expense of gas plants.
GB day-ahead electricity prices fell 10 per cent last week compared with the prior week and were down 30 per cent year on year, according to S&P Global Platts.
Analysts warn that the decline in wholesale prices could take a while to filter through to consumers because of suppliers’ hedging strategies. However, the drop in demand volume could hit utilities that have significant operations supplying business and industrial customers, such as Centrica, Drax and EDF, said Deepa Venkateswaran, an analyst at Bernstein.
Average electricity demand had remained relatively stable until Tuesday but the lockdown announced by the UK government marked “the end of the normal energy pattern”, said Paul Verrill, director of EnAppSys, an energy consultancy.
Pubs, cafés and restaurants were forced to close while some manufacturers, particularly in the car industry, decided to pause their operations.
EnAppSys compared electricity demand on March 24 and 25 — the two days after lockdown — with a day in April last year that had very similar weather.
“It’s a pretty significant decrease, looking like on average around 10 per cent but [it’s] probably more drastic in the morning because you’ve not got factories starting up in the morning or people are starting a little bit later in the day,” Mr Verrill said.
The greatest difference was at 6am when average demand was 19 per cent lower at 28.1 gigawatts (GW) versus 29.1GW on April 15 2019, the nearest comparable day in spring last year, according to EnAppSys.
Rival consultancy Cornwall Insight compared demand after lockdown with an average day in March last year, with the result showing an 11 per cent difference.
Tom Edwards, an analyst at Cornwall Insight, said thermal generation plants — which are now predominantly gas but still include a handful of coal stations — were being squeezed as a result of the drop in demand. Generators with the lowest marginal costs of production, such as wind and solar, are called upon first to meet demand.
Cheap electricity had also been flowing to Britain via subsea cables from continental Europe, where demand had also been hit hard by the pandemic, Mr Edwards said.
“Generally the UK is probably one of the more expensive wholesale markets for electricity on the continent and therefore the power is flowing to us,” he added.
Mr Verrill said the higher proportion of renewable energy meeting demand could have consequences for the stability of the electricity system.
National Grid, the FTSE 100 company in charge of matching supply and demand and maintaining the grid at a stable frequency, could be forced into greater “interventions”, such as paying wind farms to switch off or trying to curtail imports from Europe, said Mr Verrill.
National Grid said: “We have comprehensive and well-developed procedures in place to manage the effects of a pandemic and do not anticipate any issues in continuing to reliably supply electricity.”
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