Editorial - VGB PowerTech Journal 7/2020

Power supply in times of Corona and COVID-19

The worldwide spread of the Corona virus and the direct and indirect consequences and effects associated with it have been affecting our lives since the spring of this year. The pandemic and Covid 19 diseases have triggered a global health and economic crisis unprecedented for our modern society. The coronavirus, first noticed in the early days of this year in Wuhan, China, with a local outbreak, according to current knowledge, determines private, social, economic and political life.

What we personally perceive as at best restrictions on our freedom of movement hits sick people hard. Economic life has also changed. Countries around the world are reporting declines in economic output and thus slumps in gross national product of a magnitude that clearly point to an economic recession and are more serious than the declines in the course of the financial and economic crisis of 2008/2009. In OECD countries, declines of up to 13 % are reported for the first half of 2020 and a decline of around 5.6 % is expected for the global economy for the whole of 2020, provided that there are no repeated restrictions on public and economic life in the second half of 2020 due to a renewed pandemic spread.

However, the Corona crisis also highlights once again the central importance of the energy sector and, above all, a reliable and secure supply of electricity, especially in such times. An uninterrupted power supply is already in normal times of elementary importance for modern societies and any interruption can have consequences, technically for example with failed and possibly disturbed or damaged installations, privately through bottlenecks in the infrastructure starting with heating, cooling and evening lighting. In times of the Corona crisis with its restrictions of our movement space to minimize the risks of proliferation, digital communication on private and professional level plays a decisive role and therefore especially the power supply. Personal presence contact is no longer possible and counts or is sought after, rather, the familiar communication channels of telephone or e-mail are being joined above all by the wide range of offers from video conferencing tools to, in the meantime, “virtual conferences or trade fairs”. The technical basis for all these tools is ultimately a stable, uninterruptible power supply.

365/24/3600 could be the slogan for our industry. The energy suppliers have already made provision for this in advance, independently of Corona. With foresight and suitable advance planning, the power supply could be secured in the current crisis. Particular attention is being paid to the employees, as they are the ones who have to be protected against infections, but also have to operate or maintain the systems on site. The measures for this are manifold. Wherever possible, they range from minimizing the risk of infection through home office concepts, for example, to valid security concepts for plant locations and the possible self-sufficient operation of plants.

The previous Corona pandemic and its consequences have also had a significant impact on energy demand. This is clearly reflected in the global oil prices. After the previous price peak in 2011/2012 at just under 120 US$/barrel (comparable grade the US-American WTI (West Texas Intermediate)), the price of oil has fallen in some cases and risen somewhat in the meantime in the following 10 years and stood at around 52 US$/barrel at the beginning of this year. With the corona crisis, the price slumped to 13 US$/barrel, even reaching negative levels on the futures spot market. It currently stands at around 40 US$/barrel and is stabilizing at this level. Global crude oil demand is also showing significant changes. The International Energy Agency (IEA) notes a decline of around 9 % from around 100 by around 8.1 million barrels per day to currently 91.9 million barrels per day during the period of the sharp lockdown.

The effects on electricity demand were and are very clear. With the respective restrictive measures in the individual states and regions, it fell immediately and significantly.

In China, the source of the corona crisis, electricity demand in the first months of 2020 fell by 13 % year-on-year. However, it should be noted that the winter of 2018/2019 was significantly cooler than the current winter, resulting in a temperature-adjusted decline of 10 %. With the easing of public and economic restrictions, as well as a warm spring and early summer with increasing demand for air conditioning, electricity requirements returned to the previous year’s level and were already 1% higher in June 2020 than in the same month in the previous year. In India and the UK, two countries with particularly severe corona restrictions, electricity demand in March/April actually fell by almost 30 % and also rose with the easing of restrictions, although in June it was still around 5 % below the previous year’s level. The latter also applies to Germany, with the IEA reporting a drop in electricity demand of around 14 % in April.

Although forecasts are vague due to the existing uncertainties and possible renewed restrictions on private and public life, the IEA expects global electricity consumption to fall by up to 5 % overall in 2020 due to the development in consumption in the first half of the year. In the further perspective, the IEA expects the increase in demand to continue in the range of 1 to 3 %.

The changes in the generation structure in the first half of the year are remarkable. In all major consumption regions, the generation structure has developed in the direction of renewable energies. This is due to the lower overall electricity demand outlined above as a result of the lockdown measures, coupled with low ongoing operating costs for renewables and their partly prioritized regulatory feed-in.

For 2020 as a whole, the IEA expects only a gradual return to the previous economic development and the associated energy demand according to a scenario with the months-long restrictions on mobility and private and economic activities. This scenario shows a decline of 6% for total energy demand, i.e. the highest decline in the past 70 years. The impact of the Corona crisis on energy demand would thus be around seven times greater than that of the 2008 financial crisis. The IEA also considers all energy sources to be affected.

Irrespective of these perspectives, the energy sector will continue to meet its special responsibility for secure and reliable energy supplies, since, as outlined above, it has a particularly central role to play in overcoming the current crisis situation.