Industry leads winter reduction in German power demand

A reduction in Germany's aggregate power demand this winter so far has taken place on the back of lower consumption by the industrial sector, rather than by households, an analysis by S&P Global Commodity Insights showed Dec. 14.

German non-weather adjusted grid offtake -- no split between industrial and household demand is reported -- was largely in line compared with the average in 2017-2021 in January through to September. Then it fell 4.6% and 2.9% below the five-year average in October and November, respectively, according to S&P Global lead power analyst Sabrina Kernbichler.

Grid offtakes on working days fell 5% in October and 3.5% in November compared with average 2017-2021 levels, while remaining relatively robust on weekends. This suggested that most of the demand loss emerging early in the 2022-23 winter season came from industrials.

Aggregate demand averaged about 57.5 GW Dec. 1-13, data from ENTSO-E showed. This was in line with a five-year average for all of December, yet about 8% down if compared with the same period.

Some persisting demand loss on working days has been offsetting demand above the five-year average on weekends, according to Kernbichler. This came in the context of cold weather, with temperatures across Germany falling as low as 7 C below norms on some days, according to CustomWeather.

"The fact that [cold weather] failed to lift grid offtakes well above the level recorded in recent years suggests that some structural demand loss from industry has remained intact this month," Kernbichler said.

Household factor

Yet, lower consumption from households has certainly played some role in aggregate power demand, market participants said.

"Private households are saving too. About 10% haven't turned up their heating so far, it was said, so should be a mix. No colder temps this week, so after this week one could analyze the figures to have a clearer picture," a Swiss power trader said, adding that he expects lower industrial demand to linger in the week started Dec. 11 because of high inflation.

"There have been, especially lately, a focus on reducing the temperature at home and how 1 degree C could have a big impact on demand and hence prices. And until just one or two weeks ago, at least here in southern Germany, we didn't even need to turn on the heating, so that might have played a part too," a Germany-based power trader said.

Strong gas burn

Gas-fired production remains robust despite the reduction in power demand, as recent lower wind availability lifted the need for thermal generation sources.

In December so far, gas-fired generation already reached a total of 4.35 TWh, nearing 5.65 TWh registered for all of December 2021, data from Fraunhofer ISE showed.

Germany is currently not meeting its gas consumption saving targets -- both across the industry and households, Germany's BNetzA President Klaus Muller said Dec. 14 in a TV show Morgenmagazin, urging the population once again to save energy.

That said, Muller added that Germany was "very, very far away from a shortage."

Germany's gas saving target is at least minus 20% over this winter.

Looking ahead, Germany plans to introduce a retail price cap from January 2023 to April 2024 for residential consumers and small businesses for 80% of their projected demand and from January to December 2023 for industrial consumers for 70% of their 2021 demand. The price cap is set at Eur400/MWh, including levies and taxes, for residential consumers and small businesses. For industrial consumers, the cap is at Eur130/MWh, excluding taxes and levies.

"While this will prevent steeper price increases for 70%-80% of demand, the measure will keep retail prices high vs. history and, in our view, will continue to incentivize demand reduction, especially from industry," Kernbichler added.