Italian industry and electricity consumption: recovery after lockdown

I dati Terna possono aiutare a capire come la domanda elettrica varia nel corso del tempo. In particolare, grazie a un focus sul 2020, possiamo comprendere meglio la realtà post pandemia.

Electricity consumption recorded by Terna as the litmus test of the Italian economy after COVID. The coronavirus pandemic hit Italy like a tsunami, overwhelming everyone and everything. Now that the worst had past, when the hospitals were overrun and the lockdown was in place, the time has come for analyses, for numbers that will allow us to understand not only how much we have lost, but also how long it will take to recover from this unprecedented economic shock. And it is in this context that electricity consumption can help us better understand what has happened and what will happen next. Both because, as we will see, the change in electricity demand often mirrors the GDP, and because, thanks to the analysis of industrial electricity consumption, we can better understand the difficulties experienced by the main sectors of Italian industry.

Using the data provided by Terna on the weekly and monthly changes in electricity demand in 2020, we can therefore count on a privileged observation point that allows us to delve into the reality that families and businesses experience every day, directly monitoring the consumption of customers connected to the national electricity grid.

At the height of the crisis, the demand for electricity experienced a collapse never seen before. April was the worst month, with a drop of 17.2% compared to the same month of the previous year. The percentage is more or less in line with what was recorded in France (-18.9% compared to 2019) and Spain (-16.8%), while in Germany the decline was heavy but more contained (-10.6%).

From that moment on recovery began slowly with the demand for electricity which in Italy in the first week of September recorded a decline of just 2.8% compared to the same seven days in 2019, reaching, over the monthly September value, a figure basically in line with data from September 2019: 26.6 billion kWh.

These are the data regarding the country's overall consumption. A particularly interesting tool that allows us to better understand the performance of the industry is Terna's weekly IMCEI index on industrial consumption, built on the basis of the daily withdrawals of approximately 530 large industries with direct high-voltage connections and for which Terna is responsible for measuring. This index takes as a basis 100 the first week of February and compares, week after week, the trend of the sector both with the previous weeks and with those of the previous year.

The trend of the IMCEI industrial consumption index: here the week/year comparison of electricity consumption of 530 large energy consumers (Terna data)

The graph clearly shows how at the beginning of the lockdown there is a vertical fall in the index (-10% in the second week of March compared to -1% in the first). With the gradual closure of production activities, the IMCEI index continued to decline until it reached its minimum peak between the last week of March and the first of April when, compared to the same period in 2019, it reached -59%. In terms of GWh withdrawn from the Italian transmission grid, it went from 624 GWh in the fourth week of March 2019 to just 253 in the fourth week of March 2020. With the exception of August, when consumption is traditionally lower than in other months, from May onwards the curve began to rise again, reaching -17 percent in the second week of September, with a decline of 107 GWh compared to 2019.

Looking at the performance of individual industrial sectors, a beacon of hope comes from construction, a strategic sector for Italy. The companies that produce building materials almost eliminated their electricity consumption during the lockdown, dropping in April by 86% to 4.51 GWh. After five months, in September the same companies recorded +8% to 28.83 GWh, also driven by the 110% Superbonus launched by the Government to help the sector.

Weekly trend of industrial electricity consumption for the Steel, Mechanical, Chemical, Non-Ferrous Metal product classes (Terna/IMCEI index)

Ceramics and glass were also up (+ 8% in September), while particular difficulties have been recorded in the steel industry (-82% to 55.05 GWh in the last week of March, -23% in the second week of September) and in the paper industry which in the week 7-13 September still shows a drop in electricity consumption equal to -40%. Much smaller variations were instead recorded in the chemicals sector (-11% in April, -10% in September) and in the food sector (-21% in April, -7% in September).

Weekly trend of industrial electricity consumption for the Construction materials, Means of transport, Food and Paper product classes (Terna/IMCEI Index)

What will happen in the near future? For estimates on the change in demand in 2020 and 2021, Terna used a macroeconomic model based on the relationship between the trend in GDP and that of electricity demand. Looking at the graphs from 1996 to today, one can immediately see how, even in moments of shock such as the one experienced during the 2008 economic crisis, there has always been a strong correlation between GDP and electricity demand.

The historical series of changes in GDP and electricity demand (%), based on the 1996-2019 quarterly data (Terna data)

Based on these similarities and the various forecasts made by analysts, it is estimated that electricity demand will fall by 5 to 7 percent in 2020, and then recover much of this gap in 2021.