The COVID-19 pandemic is having a dramatic impact on Germany’s demand for electricity. According to initial projections, Germany could emit between 50 and 120 million tons less CO2 this year, meaning it could even exceed its climate target. EURACTIV Germany reports.
German industry is largely at a standstill: production is being interrupted, and entire plants are temporarily closed. In a forecast, the Kiel Institute for the World Economy (IfW) assumes that German GDP could fall by as much as 4.5% in the event of a nationwide curfew and by up to 8.7% in the worst case.
This is likely to have a massive impact on the country’s demand for electricity.
At around 230 terawatt-hours per year, industry alone consumes almost half of Germany’s electricity needs, followed by trade, commerce and the service sector, which is now also largely at a standstill. In comparison, households are much smaller consumers. With just under 130 terawatt-hours, they come third in relation to all electricity consumers.
So what could this mean for the electricity market and its related CO2 emissions?
The think tank Agora Energiewende published its first projection on Friday, according to which, the industry alone would emit 10 to 25 million tons less CO2 than business as usual. Together with the electricity, transport, buildings and agricultural sectors, this would result in a reduction of at least 50 million tonnes.
And in extreme cases, this could mean up to 120 million tonnes less CO2. Since emissions would decrease anyway due to warmer weather and conditions on the energy market, Agora calculates a “corona effect” of 30 to 100 million tons.
However, with the economic slump, German industry will require less electricity, meaning power prices are also expected to fall. The extent of the drop is shown in an initial projection by the consulting firm enervis, which specialises in energy markets.
If the demand for electricity were to fall by 10%, the price of electricity on the wholesale market would fall by an average of 2.5% this year, with 20% less demand for electricity, the price could fall by 4.7%, according to the calculation.
Compared to the financial crisis in 2009, such a reduction in electricity demand is “quite realistic”, Mirko Schlossarczyk of enervis, told EURACTIV. In this case, Germany would save 25 million tonnes of CO2 in the electricity sector alone. Agora even assumes a saving of 30 to 50 million tons here.
CO2 prices plunge
The coronavirus is already having an impact on the EU’s carbon market, where the price of a ton of CO2 has fallen from around €23 to just €16.
Many companies are expecting significantly lower production due to the pandemic and are selling their CO2 emission credits in order to increase their liquidity, explained Hanns Koenig from the consulting firm Aurora Energy Research.
He added that “emissions certificates can be quickly turned into cash, which explains part of the decline”. In other words, there is less demand for emission rights on the electricity market, which lowers the carbon price.
Besides, coal-fired power plants are also under strong competition from gas-fired power plants, because the price of gas is historically low, regardless of the coronavirus pandemic.
This is good for the environment because natural gas releases only half as much CO2 as coal.
“So, at the moment, two market developments are converging, which are very unfavourable for coal-fired power plants,” explained Schlossarczyk from enervis.
However, these figures must still be treated with caution because the impact of the COVID-19 crisis on electricity demand still remains within the realm of speculation and cannot be measured so quickly.
The trading of EU CO2 certificates is also to a certain extent dependent on the market psychology of entrepreneurs and therefore, difficult to predict, according to Schlossarczyk.
German climate targets can still be met
It remains just as difficult to predict how the coronavirus could affect Europe’s CO2 emissions as a whole.
Yet, an analyst from the energy think tank Ember has made the initial projection that if European industry were to suffer as much as China, 72 million tons less CO2 would be emitted this year, half of which would come from the energy sector alone.
Q: What would CO2 emissions in #EUETS fall by, if they saw the same Corona impact as in China?
A: 72MT = 4%… of which c.50% from power, and 50% spread equally aviation, cement and other…
— Dave Jones (@CoalFreeDave) March 18, 2020
The coronavirus pandemic could, therefore, provide temporary relief for the environment. According to a calculation by the think tank Carbon Brief, measures to contain the virus have slashed CO2 emissions in China by a quarter compared to the same period last year. This would have already saved 200 million tonnes of carbon dioxide in China alone.
For Germany, this means that the climate targets for 2020 could still be met after all. Last Monday (16 March), Environment Minister Svenja Schulze (SPD) proudly presented the official greenhouse gas emissions of the past year and announced that her country’s emissions had fallen by 6.3%.
This would mean a reduction in CO2 emissions of 35.7% compared to 1990, meaning the goal of 40% would be within reach. With the effects of the coronavirus, which has also paralysed the transport sector, things could just about come to an end.
And maybe it will be even more. If the forecasts of Agora Energiewende turn out to be correct, Germany would even achieve a 40% to 45% reduction in emissions – and would unexpectedly exceed its climate target, something which was until now thought to be unreachable.
[Edited by Zoran Radosavljevic and Frédéric Simon]