Virus pandemic to hit electricity producers hard

ISTANBUL

As the global coronavirus pandemic continues to roil markets, plummeting demand for energy will radically affect prices, the chairman of the London Energy Club and advisory firm Global Resources Partnership has said.

Millions of people are staying in their homes to stem the spread of COVID-19 and this situation is causing a slowdown in electricity consumption, Mehmet Ogutcu told Anadolu Agency.

"Because we're almost in recession, electricity consumption has decreased dramatically," he said, adding that this decline would affect the green economy, renewable energy and long-term decarbonization efforts in the post-crisis period.

This decline mostly stems from contracting transportation, manufacturing industry, iron-steel, glass, ceramics and cement sectors, Ogutcu explained.

He added that China would suffer the most severe slowdown, followed by the U.S. and Europe. However, in developing countries where the epidemic will likely exact a much great toll, electricity consumption can be expected to decline by over 30%

"In Europe, Italy's electricity industry will be affected the most. Demand has declined by 10-15% in the past week, and this decline is expected to worsen in the coming weeks," he said.

The decrease in electricity consumption in China -- the world's production center -- was 16% last February, and it is not difficult to guess that this rate has continued to grow, Ogutcu added.

Destructive effects

"Low electricity demand and high supply mean cheaper electricity prices. In 2020, fully-electric power plants, traders and suppliers will experience huge revenue and market losses," underlined Ogutcu.

Low prices can hurt power plants' revenues, as well as investments in renewable energy sources, project development and debt payments, he said.

Optimistically, electricity consumption can be expected to reach pre-pandemic levels in the second half of this year or 2021 with the gradual reopening of the world economy starting in the U.S. and China, and revival and recovery packages by numerous countries, according to Ogutcu.

The earnings of countries with electricity surpluses will decrease because contracts will be revised due to the current extraordinary circumstances, he added.

Coal, natural gas to remain attractive

Ogutcu stressed that it would not be possible to re-invest capital into renewable sources at these price levels, with many investments to be postponed until prices go up.

"So, I can't see a good future for renewable energy in the short and medium-term. Coal and natural gas will remain attractive in the near future," he added.

After originating in Wuhan, China last December, COVID-19 has spread to at least 185 countries and regions worldwide, with Europe and the U.S. the worst-hit regions.

Following the spread of the virus, almost all countries and sectors took some measures, such as stopping flights and closing factories.

Worldwide cases have exceeded 2.6 million with more than 183,000 coronavirus-related deaths. Over 713,000 have recovered from the virus, according to data compiled by U.S.-based Johns Hopkins University.