News / Planning for uncertainty: What will the power market look like after the pandemic?

Planning for uncertainty: What will the power market look like after the pandemic?

18th August 2020

Will the UK electricity landscape ever return to ‘normal’?

Since the first lockdown was introduced on 23 March 2020, electricity demand in the UK has fallen by an enormous amount.

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Economic growth and energy demand have typically risen in tandem. Given that the economy shrank by an estimated 20.4 per cent in April, and only grew by 1.8 per cent in May, electricity demand is unlikely to have increased in any meaningful way since the easing of lockdown on June 1st.

Effectively, the UK is expected to have used only as much power as in the 1960s during lockdown. This led to downward pressure on wholesale electricity prices, which were already on a downward trend due to a number of other factors.

What has changed in the power market?

When will the market start to ‘bounce back’?

Any bounce back will depend on a range of factors: how smooth the return from lockdown is, the possibility of local lockdowns, as seen in Leicester, and the possibility of a second, prolonged lockdown.

Despite the easing of lockdown, habits have not changed dramatically, and around half of the country is still working from home. This has contributed to a flatter morning peak period, which we expect to continue for the foreseeable future. Similarly, social distancing measures across the hospitality and leisure sectors may prevent the evening peak returning to previous levels, either.

Predictably, this dramatic and unprecedented slump in electricity demand has led to lower wholesale prices during the pandemic crisis. However, it is unlikely that these price reductions will be passed on due to increases in Third Party Costs (TPCs) incurred in balancing the grid throughout lockdown .

To help you understand the forces that are driving the electricity marketplace today – and what they might mean for your business – Haven Power has produced a special new report on how the electricity market as it stands today.

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