Similarly, average wholesale electricity prices in India in the first half of 2023 were still 80% higher than 2019 levels, and in Japan they were 30% higher compared to 2019. Despite this, average prices in Europe are still more than double 2019 levels. European wholesale prices halved from their record highs in 2022, falling closer to their 2021 average. As prices for energy commodities such as gas and coal have fallen significantly in the first half of 2023, wholesale electricity prices in many regions have declined from their previous peaks. Wholesale electricity prices remain elevated in many countries despite substantial declines, although there are regional differences. These signals will have to be accompanied by updated regulatory frameworks to incentivise demand-side flexibility and storage in order to increase the flexibility of the broader system. Negative prices also provide signals to invest in solutions and technologies to improve system flexibility. Negative prices indicate generation is not sufficiently flexible, the demand side is not adequately price-responsive or there is not enough storage to conduct energy arbitrage. Prices on the wholesale electricity market there fell below zero almost 20% of the time in 2022, compared to less than 1% of the time in Germany and the Netherlands. Meanwhile, in other markets such as South Australia, which has a very high penetration of variable renewables, the trend was even starker. This was driven by strong renewables output at times of significantly reduced demand. The number of hours in which electricity prices dropped below zero doubled in European countries such as Germany and Netherlands in the first half of 2023 compared to the same period in 2022. The outcome of policy discussions now underway could determine the future of its energy-intensive industrial sector.įalling electricity consumption in advanced economies weighs on global growth in power demand As policy developments abroad courting industrial investment put pressure on Europe’s industrial competitiveness, the European Union is at a crossroads. This trend has continued well into 2023, despite the prices for energy commodities and electricity falling from their previous record highs. Almost two-thirds of the net reduction in EU electricity demand in 2022 is estimated to be from energy-intensive industries grappling with elevated energy prices. Following these two consecutive declines, which together amount to the region’s largest slump in demand on record, EU electricity demand is set to drop to levels last seen in 2002.Įurope's energy-intensive industries have not yet recovered from last year’s production slump, as evidenced by the staggering 6% year-on-year decline in total EU electricity demand during the first half of 2023. This is despite strong growth in electrification with a record number of electric vehicles and heat pumps sold. EU electricity demand is expected to record a 3% drop in 2023, after already falling 3% in 2022. In 2024, as expectations for the economic outlook improve, global electricity demand growth is forecast to rebound to 3.3%.Įlectricity demand in the European Union is set to decline in 2023 for the second year in a row, falling to its lowest level in two decades. This moderation is strongly driven by declining electricity demand in advanced economies, which are dealing with the ongoing effects of the global energy crisis and slower economic growth. Demand is expected to grow by slightly less than 2% in 2023, down from a rate of 2.3% in 2022 and the average annual growth rate of 2.4% observed over the 2015-2019 period. Global electricity demand growth is expected to ease in 2023 before accelerating in 2024.
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