Weak industrial demand drags down EU fossil power generation: Ember

EU power generation from fossil fuels plunged to a record low in the first half of 2023 on softer electricity demand and persistently high oil and gas prices, UK-based energy analysis group Ember said in a report Aug. 30. This paved the way for renewables, whose share in the power mix rose steadily, led by wind and solar, the study added.

"The decline in fossil fuels is a sign of the times. Coal and gas are too expensive, too risky, and the EU is cutting them out. But we need to see clean power replacing fossil fuels faster," said Matt Ewen, Europe data analyst at Ember. "A massive push, especially on solar and wind, is urgently needed to underpin a resilient economy across Europe."

High energy prices and emergency measures dragged EU electricity demand down to 1,261 TWh in H1 2023, data showed. This is below even 2020's pandemic low of 1271 TWh and the lowest since at least 2008 for current EU member states.

Fossil fuels generated 410 TWh in the EU, producing just 33% of power demand in H1 2023, down 17% from the same time last year. The fall was also exacerbated by a reduction in EU industrial output and emergency measures over winter.

Coal generation plunged year-on-year by 23% in this period while gas decreased by 13% year-on-year.

Transition underway

This latest data also reiterates how Russia's invasion of Ukraine has served to focus minds on energy security in Europe, indirectly accelerating the region's transition away from fossil fuels.

The need to replace Russian gas supplies may have trumped climate considerations, with coal plants reprieved, but renewable energy developers have also adapted to the volatility of war, offsetting higher capital costs by boosting exposure to rising power markets.

"17 countries generated record shares of power from renewables, with Greece and Romania passing 50% for the first time and Denmark and Portugal both breaking 75%," Ember's report showed.

Solar observed the strongest growth, with generation up 13% compared to the same period in 2022 while wind generation rose by 5%. Hydro and nuclear continued their moderate recovery from their historic lows in 2022, though their long term outlook is uncertain, the report added.

Wind and solar accounted for more than 30% of electricity production in the EU for the first time in both May and July, and surpassed total fossil generation in May.

But analysts at S&P Global Commodity Insights noted that cost inflation seen since Russia's invasion of Ukraine has been one factor driving weak power demand.

"This has also put some new supply projects in jeopardy. Meanwhile the low demand/high renewable situation has seen increasing instances of zero or negative hourly prices this summer as low carbon flexibility such as battery storage fails to keep pace with expansion of intermittent capacity," they added in a recent report.