Demand for electricity seems to have hit rock bottom across most major European markets and is now showing signs of a tentative recovery as countries slowly restart their economies.

In Spain, power demand rose by 7% in the week starting April 13 as manufacturing, construction and some services industries returned to work, according to an analysis of grid operator data by Bernstein. Demand in the U.K. also increased by 1% compared to the previous week, while France, Italy and Germany saw only modest declines of between 1% and 2%, much lower than in previous weeks.

"Power demand appears to have found its bottom," Bernstein analysts Meike Becker and Deepa Venkateswaran wrote in a note to clients.

Governments took drastic measures to contain the coronavirus throughout March, mandating nationwide lockdowns, but some are now starting to relax restrictions as the rate of new infections is slowing. The reversal could signal some relief for power producers, who have suffered from a loss of demand and the resulting lower electricity prices as much of the economy came to a standstill.

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But while the demand drop is now leveling off, the road to a full recovery could be a long one. Aurora Energy Research, a consultancy, said April 22 that even its moderate outlook would see power demand and prices "significantly lower" during 2020, with a rebound by 2022. Its worst-case scenario could see wholesale prices fall by 30% to 50% in 2020 and markets not recovering until 2025.

To date, power demand across Europe has fallen by between 10% and 20% and prices are down 30% to 40% on average. In addition to lower demand, a price drop in commodities like gas and carbon has also weighed on the electricity price.

"Now the question is: how quickly does demand come back? And do we reach the previous level?" Venkateswaran said in an interview, pointing out that many businesses will have gone bust in the meantime.

The price drop has hit revenues for unhedged and uncontracted power plants. Coal generators in Germany have already been forced to reduce their output amid high renewables generation and coal producers elsewhere are facing similar pressure. The picture for gas is more mixed, Aurora said: German gas plants are winning out over coal thanks to low gas prices, while gas generators in less coal-dependent Britain suffer from lower run rates.

"The effect of coronavirus has rippled through European energy markets," said Felix Chow-Kambitsch, head of commissioned projects for Western Europe at Aurora. "European power utilities are likely to experience a significant fall in revenues in 2020."

The impact also extends to renewables, which are increasingly exposed to power prices as developers build outside of government auctions. Even assets under some subsidy schemes, like Britain's renewable obligation, have revenues that are directly linked to wholesale markets.

"Right now [the operators] are concerned, but they know that they're able to weather the storm," Tim Dixon, an analyst at consultancy Cornwall Insight, said in an interview. "But we do think if this goes on for a long period of time, that could change."

Generators in the U.K., as well as countries including France and Germany, have had to reckon with a spike in negative prices, which means power producers have to pay customers to take the electricity off their hands. Renewables assets under Britain's contracts for difference program, as well as some under Germany's feed-in tariff regime, do not receive their subsidies if prices are negative for more than six hours at a time.

"Nobody was expecting this. We were mostly seeing negative power prices on the weekends before this crisis," Tim Steinert, a senior consultant at energy advisory firm Enervis in Germany, said in an interview. "What we are seeing right now is a combination of factors that you just couldn't foresee last year — the combination of very high availability for both solar, onshore and offshore wind at the same time, plus of course reduced power demand all over Europe."

Power prices could be supported in the near term by reduced output. Electricité de France SA announced this week that it will keep a number of its nuclear reactors in France offline in response to the crisis, adding to thermal shutdowns in other countries.

But while power demand in Europe largely rebounded within a year after the 2008 financial crisis, power producers also expect the effects of the economic slowdown to linger this time.

The Renewables Infrastructure Group Ltd., a London-listed renewables investment fund, said on April 22 that its projected power prices for the five markets where the company has assets — the U.K., France, Germany, Ireland and Sweden — are now on average 17% lower over the next five years, including a 25% reduction over 2020 and 2021.

"These impacts are expected to continue over the near term, impacting all power generators," the company said.