Europe’s power system facing heatwaves in Europe; Nuclear output down 10%.
Can Europe’s power system handle the heat? | The Long View | Mirabaud Group
Can Europe’s power system handle the heat? | The Long View
As heatwaves become more frequent and intense across Europe, their impact is extending well beyond temperatures, putting growing pressure on electricity demand, power generation and energy prices. Watch the video to hear Ricardo Castillo’s insights.
The European continent is experiencing a rather strong summer heatwave. According to the World Meteorological Organization , June temperatures surged 3.0°C above the 1991–2020 average, breaking national all-time records across Germany, the Czech Republic, Poland, and Denmark.
This period ranks as the second-warmest June in recorded history. It has triggered severe environmental consequences, pushing devastating wildfires out of their traditional Mediterranean boundaries and deep into Central and Northwestern Europe. Data we are receiving for July confirms the same path.
The intense heatwave also caused higher demand for electricity … the figures show that electricity demand increased in Europe as the heatwave intensified. According to the French grid operator, daily electricity demand in France increased by 20% during peak heat days mainly explained by air conditioning and cooling systems that are expanding rapidly across Europe, every time less as matter of comfort than of public health and safety.
And while this demand for electricity increased, nuclear and wind power, which are Europe’s low-carbon base-load supply, were constrained… In aggregate we can estimate that nuclear production was curtailed by more than 10GW, or roughly 10% of the EU nuclear capacity, as the rivers used to cool the steam systems were already too warm. And at the same time, we went through a “wind drought” where there’s basically not enough wind to power the turbines.
Of course, solar performed extremely well in these conditions, hitting record generation, compensating in part for the missing Gigawatts… only during the sunny hours though. Around 8pm solar generation goes close to zero as well, just when peak demand strikes as households return home. The European power system needed to rely mainly on gas fired turbines to make up for the energy loss which makes the cost of electricity increase massively for all users.
According to the European commission, Europe is experiencing significantly more frequent, intense and longer lasting heatwaves than in the past. If this proves right, we’ll face a simultaneous supply and demand issue that is becoming seasonally structural translating in higher electricity bills overall as Europeans will pay higher operating costs and to finance the improvements on the European grid.
The International Energy agency expects European union electricity demand to grow north of 50TWh per year till 2030, and cooling alone might require more than the annual 4TWh currently anticipated.
Data centers, Electric vehicles, economic growth… and now heatwaves…
Facing a structurally growing demand, yet another reminder that efficient all-weather (all season) power generation, modern grids and probably more utility-scale battery storage are more a structural story than a superficial narrative.
in its last July official press conference, in the context of the current middle east conflict, the ECB reminded us that it views the ongoing surge in energy prices as a major, highly volatile risk that has delayed the Eurozone’s return to its 2% inflation target until at least mid-2027.
Since energy weighs 9% of the European Consumer Price Index, any large increase like the one we’ve seen this year impacts materially the consumer basket price. Such pressure on the cost of living in the eurozone is monitored carefully in Frankfurt.
Half of this European energy basket is composed of electricity and gas bills. The topic we’ve just discussed, every time more relevant as electrification goes on.
The other half are mainly refined products like gasoline, diesel and heating oil, which prices skyrocketed with the crisis in Hormuz and struggle to come down along with crude prices as refinery margins remain at very high levels. Europe imports all its crude and has been reducing its refinery capacity. It depends on global markets and has little to no influence.
It is not an easy task for the ECB to adjust its monetary policy to energy prices volatility.
If inflation is purely supply-driven, aggressive interest rate hikes risk choking off fragile economic growth, but if there is a concomitant underlying demand-driven boom reminiscent of the 2022 energy crisis, failing to apply monetary brakes will put at risk long-term price stability.
Every systemic shock underscores the necessity of a resilient energy network. Following the geopolitical crisis of 2022, Europe successfully diversified its natural gas reliance by investing in LNG regasification units and securing new supply corridors.
Europe will certainly not reinvest in its refining capacity and will stick to its low-carbon electrification roadmap, focusing on the integration, resilience, and transmission capacity of its power grid which remains the primary strategic priority and a still valid structural investment theme.
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