How effective were EU emergency power demand reduction measures?

How significant could the role of the demand side become in a decarbonised power system? As winter turns to spring, there is an unprecedented opportunity to assess the effectiveness of emergency measures designed to alleviate pressure on systems across the EU. We’ve drawn on unique insight from our Europe Power Service to explore the impact of these measures and consider their implications for the future of power markets.

Fill in the form to access an extract from the full report including charts on winter load shedding by country and a heat map of European power prices.

What were the EU’s emergency energy demand measures?

In September 2022, the European Commission acted in response to the region’s energy crisis. Several emergency measures were announced in anticipation of a winter of high prices and energy supply risk.

A price cap was designed to redistribute the excess revenues received by inframarginal electricity generators to final consumers. The Commission also brought forward demand reduction measures to alleviate pressure on the power system and offset gas demand.

The demand reduction targets came in two forms:

1. A voluntary 10% reduction of gross electricity consumption
2. A mandatory target to reduce load by 5% in peak price hours, to flatten the demand curve and dampen prices.

How effective were the EU’s electricity demand reduction measures?

We’ve analysed the data from across Europe and total EU demand dropped 6% over the four month period in which the measures were in place (1 December 2022 to 31 March 2023) – down 60 TWh on the five-year average. Peak demand was also down across the region, with many markets exceeding the mandated 5% reduction in load during peak price hours.

While seasonal demand was reduced across most markets, only Slovakia, Romania and Greece managed to exceed the 10% reduction threshold. In Greece, generous subsidies were put in place for consumers who reduce their electricity consumption by over 15%.

Interestingly, the Republic of Ireland saw a substantial increase in demand on its five-year average. Economic growth and expanding demand from data centres has seen its volumes trending upward in recent years.

Different governments implemented a range of national measures to help manage demand, from changing recommended workplace temperatures to encouraging the installation of LED lightbulbs. The Italian grid operator, Terna, launched a TV and digital campaign aimed at engaging and mobilising the public. Germany banned the heating of private swimming pools and required shops to turn off nighttime advertising lights.

In Italy, the bulk of demand losses came from the industrial sector. Terna's IMCEi index – which collects data from around 1,000 large industrial power-intensive companies – was down 6.8% year-on-year in February. The non-ferrous metals sector saw the steepest decline at -41%.

But mild temperatures also played a very key role in reducing winter demand. Through the winter, the average EU daily minimum temperature rose by 0.5 °C relative to the five-year average.

Low temperatures increase heating load, particularly in markets with a high penetration of electric heating like France, where we estimate temperature to have accounted for 50% of winter losses.

In Slovakia, Romania and Greece, where the demand reduction target was met, average minimum daily temperatures were up 1.2 °C, 1.4 °C and 0.7 °C respectively relative to the past five winters.

What does this tell us about the future of power markets?

Europe managed to avoid the worst impacts of energy crisis this winter. Sustained mild weather weakened gas and electricity demand, weighing on commodity prices and maintaining plentiful gas storage levels.

Day-ahead power prices across Europe are back to levels last seen in July 2021, and spells of high wind output have even contributed to a surge in negative prices. Germany alone has had 383 instances of negative prices in 2023 at the time of writing.

But despite this background, high consumer costs remain a pressing concern and affordability has risen up the agenda of policymakers.

Influences of weather and price aside, the scale and consistency of demand reductions – though mostly below the 10% target – suggest that the implementation of energy-saving measures was broadly successful. At a market level, measures were wide-ranging and often innovative by design. Their adoption will foster confidence that ambitious 2030 EU energy efficiency targets can be met.

Looking forward, as power systems are supplied by increasing levels of variable generation, the need for flexibility will become more vital. The past few months have shown that under emergency conditions, market participants are willing and able to adjust consumption in response to the right incentives or price signals.

As systems become more deeply decarbonised, such mechanisms must be embedded as a routine part of market function, rather than an emergency intervention or chance response.

Want to explore this topic in more detail?

Fill in the form at the top of the page to access a complimentary extract from the full report, including charts on winter load shedding by country and a heat map of European power prices.