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© 2018 Aurora Energy Research Limited. All rights reserved.20/05/2020© CONFIDENTIAL: NOT FOR EXTERNAL DISTRIBUTION
Impact of Coronavirus on European energy markets
CONFIDENTIAL: NOT FOR EXTERNAL DISTRIBUTION
Weekly tracker for 20th May 2020
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Executive Summary
1. Comparisons to previous week unless stated otherwise
Update for week ending 17th May:1
▪ The number of new reported COVID-19 cases and deaths saw a persistent decline across Europe, as lockdown restrictions were eased in many countries
▪ Crude oil futures rose further on global production cuts and signs of a recovery in fuel demand
▪ NBP Gas futures for 2020 declined further due to high storage inventories and weak demand
▪ EUA Carbon prices continue to hover below €20/tonne – around 20% below pre-COVID levels.
▪ Power demand recovered across many European countries as restrictions are further relaxed, but still remains weak relative to the same period last year.
▪ Power prices declined across much of continental Europe, remaining on average 30% - 40% lower than pre-COVID levels.
▪ Germany has seen record instances of negative price hours in 2020. This was cause by high wind in February, and the effect of COVID restrictions in reducing power demand from March onwards.
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About Aurora
Aurora provides data-driven intelligence for the global energy transformation
Source: Aurora Energy Research
4CONFIDENTIAL: NOT FOR EXTERNAL DISTRIBUTION
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COVID-19 Forecast ReportScenario analysis for European power markets
▪ COVID-19 impact on power prices, generation mix, capacity additions and retirement, asset profitability and carbon emissions
▪ Asset valuation impact compared to stock market declines
o How will individual assets perform?
▪ Industry and technology winners and losers
▪ Implications for security of supply
▪ Risk of stranded assets
▪ All forecast data available in Excel
Recent impact of COVID-19 on European power markets
▪ Analysis of impacts on global economies
o What is the impact on recent growth?
▪ Analysis of impacts on global financial markets
o How are utility stocks performing?
▪ Analysis of impacts on power markets across Europe
o How are power prices developing?
o How is power demand evolving?
Drivers and assumptions of changes and scenario design
Forecast and implications of COVID-19 impact
We are pleased to offer a reduced rate for Aurora subscribers
In addition, we offer bespoke services, including portfolio stress testing, transaction support and board briefings
▪ Detailed description of framework and scenario design
▪ Economic Scenarios:
1. Mild Global and European Recession
2. Severe Global and European Recession
3. Severe Global Recession and European Depression
4. Global and European Depression
▪ Forecast and scenario drivers include demand, supply, commodity prices, lockdown duration, and investment/financing
Comprehensive scenario report and forecast dataset for
1 2 3
[email protected] +49 (0) 30 120 84969 | +44 (0) 7741 909078
For more information, please contact Client SupportTo pre-order, please use the form on our web page
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1. COVID-19 reported cases
2. COVID-19 impact on European crude oil, gas and carbon markets
3. COVID-19 impact on European power markets
Contents
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Total cases per 1 million population12
Total number of COVID-19 confirmed cases exceeds 1.3 Million across Europe
Sources: EDCD, Worldometer
1. Chart is in log scale. 2. Data to 18h May
100
10
1
10,000
1,000
10,000,000
100,000
1,000,000 UK
4th May
23rd March
6th April
20th April
18th May
Italy
Spain
Germany
France
Netherlands
Ireland
Poland
EU-27 + UK
9th March
5,950
4,908
3,735
3,735
3,632
2,626
2,577
2,117Germany
Ireland
Spain
EU27+UK
Italy
France
UK
Netherlands
499Poland
Total number of reported cases12
7CONFIDENTIAL: NOT FOR EXTERNAL DISTRIBUTION
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Daily increase in reported cases1
Most European countries have seen a sustained decrease in number of new COVID-19 cases and deaths
Sources: EDCD
1. Chart is in log scale. Rolling 7 day average.
0.1
1.0
1,000.0
10.0
100.0
10,000.0
100,000.0
29th March
1st March
15th March
12th April
26th April
10th May
Daily increase in COVID-related deaths1
Spain
Italy
Germany
France
UK
Netherlands
Ireland
Poland
EU-27 + UK
0.1
1.0
1,000.0
10.0
100.0
10,000.0
10th May
26th April
15th March
1st March
29th March
12th April
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COVID restrictions have been loosened in many European countries over the last fortnight
Sources; Oxford COVID-19 Government Response Tracker
80200 40 60 100
Spain
Poland
France
Germany
Netherlands
Ireland
Italy
UK
1st April
1st March 1st May
16th May
Country Changes to restrictions
France Some schools, shops & public amenities reopened
Germany Shops and schools allowed to reopen already
Ireland Some shops reopen from 18th May
Italy Some shops & factories reopened from 4th May; schools closed until Sept
Netherlands Primary schools reopened 11th May; bars/restaurants closed until 20th May
Poland Retail & leisure premises reopened on 4th May; schools reopen 24th May
Spain Some small businesses, bars and restaurants reopened
UK Construction and manufacturing operations partially resumed; primary schools to open for selected years from 1st June
COVID stringency Index,Index (0-100)
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1. COVID-19 reported cases
2. COVID-19 impact on European crude oil, gas and carbon markets
3. COVID-19 impact on European power markets
Contents
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Oil futures continued to recover, supported by ongoing production cuts and easing lockdown restrictions
Sources: Aurora Energy Research EOS, Reuters
Prompt crude oil futures1,$/bbl
Crude oil futures,$/bbl
WTI Brent
Jan-20
40
Jan-23Jan-22Jan-21 Jan-24 Jan-250
10
20
30
50
60
70
Futures gain momentum with the combined effect of falling
crude production in major producers and recovering auto
fuel demand
11/05/2020
04/05/2020
20/04/2020
19/05/2020
-40
-30
-20
-10
0
10
20
30
40
50
60
2nd March
16th March
30th March
14th April
28th April
10th May
Prompt futures climbed as Chinese oil demand
rebounded to pre-COVID-19 levels
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NBP gas futures remained in a bearish trend due to muted demand
Sources: Aurora Energy Research, Reuters
Note: 1. Futures are a rolling 7 day average.
▪ The front part of the NBP futures curve was further hit due to limited storage injection driven by full inventories and warm weather
▪ But this decline is in part offset by the upside risk, caused by potential interruption on Russian gas flows via the Yamal pipeline as Poland will terminate the transit deal with Russia in May without renewal
Average monthly NBP gas futures,1
pence / therm
Average monthly NBP gas futures,
€/MWh
0
5
10
15
20
25
0
5
10
15
20
25
30
35
40
45
50
55
60
65
Jan-20 Jan-21 Jan-22 Jan-23 Jan-24 Jan-25
19/05/2020
11/05/2020 14/04/2020
30/03/202027/04/2020
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Gas demand showed a sign of slow recovery as some COVID restrictions in Europe were lifted
Sources: Aurora Energy Research EOS
Notes: 1) Envelopes for monthly NW Europe gas storage inventory are calculated by taking the maximum and minimum monthly values from December 2014 until February 2019.
Monthly NW Europe gas consumption,bcm
0
100
200
300
400
500
600
700
800
900
1,000
1,100
29th March
1st March
15th March
12th April
26th April
10th May
+5%
Daily NW Europe gas consumption,mcm
GB
Germany Netherlands
France
0
5
10
40
15
20
25
30
35
Apr-20
Jun-19
Dec-19
Apr-19
Aug-19
Oct-19
Feb-20
Min-max envelope(Dec 14–Feb 19)1Total Consumption
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NW European gas storage inventory is 10% higher than trailing 5 year average
Sources: Aurora Energy Research EOS
Notes: 1) Storage data is based on net daily flows. 2) Envelopes for monthly NW Europe gas storage inventory are calculated by taking the maximum and minimum monthly values from December 2014 until February 2019. 3) Envelopes for daily NW Europe gas storage inventory calculated by taking the maximum and minimum daily values from March 2015 until May 2019.
Monthly NW Europe gas storage inventory,bcm
0
10
40
5
15
20
25
30
55
35
45
50
60
29th March
1st March
26th April
17th May
Daily NW Europe gas storage inventory,bcm
15
60
20
25
30
35
45
10
0
50
55
40
5
Feb-20
Apr-19
Jun-19
Aug-19
Oct-19
Dec-19
Apr-20
Total inventory Min-max envelope (Dec 14-Feb 19)2,3
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EU ETS prices continued to hover around €20/tonne –around 20% below pre-COVID levels
Sources: Aurora Energy Research, Eikon
Lower Aviation demand: Global flight volumes fell by 2/3rds during March. Easyjet grounded its entire fleet. UK recently cancelled auction for EUA Aviation allowances
Lower Industrial demand: Factory closures due to COVID restrictions; reduced demand for metals and cement due to reduced manufacturing and construction activity
Lower Power market demand: Lower power demand (explored in next slides) reducing permit demand from coal and gas generators
MSR Mechanism: will gradually remove excess permits from the market.
ETS reforms: European Commission remains committed to tighten ETS as part of Green Deal, but looks likely to be delayed; Poland challenging logic of tightening ETS at this time
15
25
10
20
16-Mar
2-Mar
13-Apr
30-Mar
27-Apr
9-May
-21%
Spot EUA price,€/tonne
Downward pressure on price in short term
Upward pressure on price in medium term
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1. COVID-19 reported cases
2. COVID-19 impact on European gas and carbon markets
3. COVID-19 impact on European power markets
Contents
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European power demand has seen a slight recovery as lockdown measures are eased
Sources: ENTSO-E, Aurora Energy Research
Data excludes self-generation and embedded renewables consumption
4-May9-Mar
10
2
023-Mar 6-Apr 20-Apr
1
3
4
5
6
7
8
9
11
Germany
Spain
Poland
France
Italy
Netherlands
UK
Ireland
Weekly sum of power demand in 2020,TWh
Change in demand versus same week last year:
w.c. 11May
w.c. 4May
ES: -12%
PL: -3%
IE: -11%
FR: -16%
IT: -17%
UK: -21%
DE: -7%
NL: -3%
Lockdown introduced
-9%
-8%
-11%
-13%
-12%
-9%
+6%
-5%
Week commencing
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European power demand has seen a slight recovery as lockdown measures are eased
Sources: ENTSO-E, Eurostat, Aurora Energy Research
COVID-19 cases1
Per 1 million population
3,735 5,950 3,6233,735
Power demand by end user2
40 28 33 45 31
32 31 31 27 31
22 36 31 25 356 4 34 3
1) Data to 18th May 2) Data for 2018 calendar year
Hourly loadduring sample weeks(% of same week in 2019)
60
70
80
90
100
110
08
:00
12
:00
04
:00
16
:00
20
:00
60
70
80
90
100
110
12
:00
08
:00
04
:00
16
:00
20
:00
60
70
80
90
100
1100
8:0
0
12
:00
04
:00
16
:00
20
:00
60
70
80
90
100
110
08
:00
12
:00
04
:00
16
:00
20
:00
60
70
80
90
100
110
04
:00
12
:00
08
:00
16
:00
20
:00
w.c. 11 May w.c. 4 May
Demand recovers significantly in France as restrictions are relaxed.
Italian demand increases slightly as lockdown eased
Other Household Commercial Industrial
Demand increases as Germany continues to open commerce sector
2,117
GB demand recovers as some workplaces reopen
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Day-ahead prices decreased across much of continental Europe, whilst Ireland and Spain saw an increase
Sources: ENTSO-E, Aurora Energy Research
9-Mar
45
20-Apr23-Mar
15
4-May6-Apr5
10
25
20
30
35
40
50
Spain
Germany
Poland
UK
France
Italy
Netherlands
Ireland
Weekly average day-ahead power prices in 2020,EUR/MWh
Change in prices versus previous week:
w.c. 11May
w.c. 4May
ES: +33%
PL: +7%
IE: -15%
FR: +29%
IT: +17%
UK: -5%
DE: +17%
NL: +7%
-11%
-5%
0%
+9%
-9%
-4%
-7%
+13%
Week commencing
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65 9 11 12 13
160
15 16 1714
100
19 200
20
1 82
40
3 4
80
200
120
7
60
180
18
220
10
140
Germany has seen record number of negative prices in 2020, due to high wind in February and COVID effects
Sources: Netztransparenz, ENTSOE, Aurora Energy Research
Cumulative number of negative price hours,#
Calendar Week
2015 2016 2017 2018 2019 2020 Lockdown
1 2Record high wind generation in February (20 TWh) leads to high number of negative price hours early on in the year
1
COVID-19 lockdown further increases negative price hours due to lower demand in sunny hours during the day
2
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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24
14
15
0
8
12
9
10
11
5
16
1
13
2
3
4
6
7
Germany: negative prices have been concentrated during daytime in 2020, driven by lower demand
Sources: Netztransparenz, ENTSOE, Aurora Energy Research
Negative price hours (Jan-May average),#
Hour of the day
2015 2016 20182017 2019 2020
Daytime occurrence of negative price hours
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Aurora continues to help you navigate the impact of COVID-19 on European energy markets
Source: Aurora Energy Research
COVID-19 Special report Consultancy & Bespoke Analytics
How do our market intelligence subscribers stay up-to-date on COVID-19 implications?
▪ Power Market Forecast reports incorporating COVID impacts on commodities and demand
▪ Group Meetings will explore sensitivitieson the impact of COVID on European power markets and asset economics
▪ Podcasts with industry leaders
▪ Coronavirus tracker email assessing the impacton European power and commodities markets
▪ Comprehensive exploration of the range of scenarios from the fallout of COVID-19
▪ Impact on power prices, spreads, viability of investments, carbon emissions
▪ Differences in impact amongst technologies
▪ Implications on asset values vs stock market
▪ Bespoke scenarios for business planning and transaction support
▪ Stress testing portfolios
▪ Defensive/opportunistic portfolio optimisation
▪ Board/Management briefing
For more information contact [email protected] for GB, Ireland, France and Iberia and [email protected] for Germany, Poland and BeNeLux
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GB FRDEGroup Meeting
Market ForecastReport
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