A new normal for the energy industry

16 July 2020

The current pandemic is a global crisis that has posed a significant impact on every industry and forced many countries to impose lockdown measures. As a result, power demand has decreased by 10% across Europe. Nearly half of the electricity generation has been met by renewables, and the level of CO2 emissions has declined by 15%.

As the rate of infection has started to slow down in many areas, societies and economies are cautiously reopening. People start to discuss how to best prepare for the future – a new normal life post-COVID-19. With restrictions being lifted in several countries; will we see the energy industry be back to ‘business as usual’?

Signs of recovery in electricity demand

In the last couple of weeks, electricity demand in Europe has shown the trend of recovery gradually. From an average decline of 10%, the load last week (week 28) was only down by 4.4% compared to the same week last year. This is the narrowest gap since mid-March when the majority of the European countries started to implement the restrictions. During recent weeks, the electricity demand has been even higher than the pre-pandemic levels in several countries such as Norway, the Netherlands and Switzerland.
Weekly Load Across Europe Against Last Year
Relative change is calculated against the same period last year (2019)
Given the steady increase in electricity demand in most countries; do we expect the rise of inflexible generation again in the electricity mix, and are the golden shiny days of renewables over?

Renewables still shows its resilience

The data from Wärtsilä Energy Transition Lab shows that during last week (week 28) in Europe, coal generation continued its declining trend (down by 26.7%), while renewable generation still maintained a significant share in the power mix (42% of total generation, an increase of 8.8 percentage points versus the same week last year). Renewables have been the most resilient sources of electricity generation in the face of the pandemic, and still stands strong during the recovery period. One day to highlight so far this month is Sunday 5 July, as we witnessed a new record with the highest share of renewables in Europe so far this year – an impressive amount of 55%!

Summary of Electricity Market in Europe – Week 28 (6 July – 12 July)

Summary of Electricity Market in Europe – Week 28 (6 July – 12 July)
The trend can be observed across most of the European countries. For example, in France and Spain last week, the electricity demand was already close to last year’s level, and the renewables share in the mix still enjoyed its upward trend with a healthy increase of 8 and 12 percentage points respectively.
Summary of Electricity Market in France – Week 28 (6 July – 12 July)

Summary of Electricity Market in France – Week 28 (6 July – 12 July)

Summary of Electricity Market in Spain – Week 28 (6 July – 12 July)

Summary of Electricity Market in Spain – Week 28 (6 July – 12 July)

Get ready for the new normal

The recovery will not happen overnight, and according to McKinsey’s estimate¹, for most industries it will take years to recover to the pre-COVID-19 level. In the new normal world, renewables, whose costs continue to decline, will still possess a high share in the mix and strongly prove its ability to become the future baseload for the power system. The observations from the energy industry clearly show a major shift in the power generation mix and an opportunity to accelerate the transition towards greener electricity. Now it is high time for every government to rethink their optimal power system to ensure that it will be cleaner, more resilient, and more flexible in the future. In line with the findings from IRENA² in the wake of the pandemic, investment in renewables needs to be prioritized. At the same time, it is crucial to address the intermittent nature of renewables with a sufficient amount of flexible power generation in the system.


To learn more about how Wärtsilä can help you navigate the seas of energy transition please visit:

1. McKinsey (July, 2020). COVID-19 and the great reset: Briefing note, July 9, 2020. https://www.mckinsey.com/~/media/mckinsey/business%20functions/risk/our%20insights/covid%2019%20implications%20for%2
0business/covid%2019%20july%209/covid-19-and-the-great-reset-briefing-note-july-9-2020-vf.pdf

2. IRENA (June, 2020). Post-COVID recovery: An agenda for resilience, development and equality. https://www.irena.org/publications/2020/Jun/Post-COVID-Recovery

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Author

Tri Nguyen

Tri Nguyen

Power System Analyst, Business Development
Wärtsilä Energy


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