European energy demand has taken a serious hit as load falls amid hotter climate and renewables buildout outpaces future load progress, BofA analysts stated in a brand new BofA International Analysis report despatched to Rigzone this week by the BofA workforce.
“Settled day-ahead costs for many European nations spiked to as excessive as 740 EUR ($804)/MWh in August 2022 because the assault to the Nordstream pipelines connecting Russia to Germany triggered a serious upward transfer on TTF pure gasoline costs,” the analysts famous within the report.
“Since then, European energy costs have collapsed, averaging round 70 EUR ($76)/MWh in July month to this point, however stay above common pre-Covid ranges of round 40 EUR ($43)/MWh. We estimate that the dramatic spike in European energy costs in 2022 completely destroyed about 4 % of electrical energy demand throughout the continent,” they added.
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“The market is pricing in additional electrical energy value deflation, with futures in Spain buying and selling close to 55 EUR ($59)/MWh for 2025. But we imagine energy costs might decline even additional. In spite of everything, European energy demand has come off exhausting following the dual shocks on industrial and retail customers of pandemic and warfare,” they continued.
The analysts said within the report that the decline in European costs is carefully linked to falling hundreds throughout the most important European economies, which they stated have shrunk to 90 % of 2019 ranges on common and to as a lot as 85 % within the UK.
“But different components like climate and rising world thermal and renewable power provides … have performed a job too,” the analysts famous.
“Hotter climate throughout Europe is partly guilty too, with temperatures within the first half of the yr throughout Germany, the UK, Italy, France, and Spain averaging eight % larger than in 2019,” they added.
“Whereas hotter winter climate has diminished demand for energy, cooler climate this summer time has additionally failed to date to stoke demand for air con,” they continued.
Within the report, the analysts additionally said that they imagine renewables progress might proceed to weaken Europe’s energy costs.
“Wind and photo voltaic capability progress averaged eight % yr on yr over 2013-22, with progress between 2021 and 2022 reaching 12 %,” they stated within the report.
“Over the identical timeframe, thermal gasoline technology capability fell 15 % to 323 GW, or 13 GW under wind and photo voltaic capability. Rising capability and decrease hundreds allowed wind and photo voltaic technology to outpace thermal technology yr to this point,” they added.
“Wind technology averaged a file 39 GW to this point this yr, up 4 GW from 2023, whereas photo voltaic grew 5 GW yr on yr in July and averaged 2 GW larger yr on yr, yr to this point. Rising EV adoption, knowledge facilities, and electrification efforts ought to begin to increase Europe’s hundreds, however demand progress will probably be outpaced by renewables provide,” they continued.
Based on the Power Institute’s 2024 statistical evaluation of world power, Europe’s main power consumption determine was 77.85 exajoules final yr. That determine marked a 2.2 % yr on yr lower, the evaluation confirmed. From 2013 to 2023, Europe’s main power demand determine has dropped by a yearly common of 1.0 %, the evaluation outlined.
Europe’s renewable power technology elevated 10.0 % from 2022 to 2023, in keeping with the evaluation, which confirmed that the area’s renewable power technology determine was 1769.3 terawatt hours final yr.
Within the EI’s evaluation, main power contains commercially traded fuels, together with fashionable renewables used to generate electrical energy. Power from all sources of non-fossil energy technology is accounted for on an input-equivalent foundation.
The evaluation’s renewable power technology determine is predicated on gross technology and doesn’t account for cross-border electrical energy provide. It consists of electrical energy generated from wind, photo voltaic, hydro, geothermal, biomass, and different sources of renewable power.
To contact the writer, e-mail andreas.exarheas@rigzone.com
