As millions of people across Europe are pondering when and how they will return to offices in the post-pandemic world, the region’s power traders are trying to figure out what a continuation of working at home will mean for their markets.
The difficulty of making predictions about how people will behave is highlighted clearly in the chart below. It shows how demand during the pandemic in Germany, Europe’s biggest power market, at times deviated significantly from the expected load.
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German power demand deviates from pre-pandemic expectations
Sources: BloombergNEF; Entsoe
Power traders already have a tough job juggling thousands of data points that determine electricity prices -- from which power plants will be generating to the expected energy usage during every hour of the day. Correctly predicting the the impact on demand from new and more flexible work-from-home policies will be crucial.
“That will be interesting to see because we could have half the people in the office and half at home,” said Simon Rathjen, founder and director of intraday power markets at MFT Energy A/S in Aarhus, Denmark. “And you still have to heat or cool the office as if it’s full.”
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Electricity load growth for Europe under mid scenario*
Source: BloombergNEF; Projections are not a forecast and based loosely on GDP modeling alongside observations of Covid-19 demand destruction
*scenario between situation where virus subsides and one where a relapse takes hold
So far, new working policies that have come out of the region’s blue chips vary widely. U.K. insurer Aviva Plc found that 95% of its staff would choose either full-time remote work or a flexible home-office split once lockdowns end. BP Plc said that about 25,000 full-time office-based staff will work 40% of their time from home. Goldman Sachs Group Inc., on the other hand, has said it’s pushing for a full return.
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While overall demand could well return to normal once the pandemic ends and economic activity picks up, the major difference could be in the exact time during the day when most power is consumed.
“You will still see the peak when people are starting their days and when they are doing the cooking, but it’s more about exactly when it will happen,” Andreas Schwarz Knudsen, Danske Commodities A/S’s head of commercial business development. “Your evening peak may start earlier in London for example,” because people are not traveling long distances to get home.”
And in the British capital, Nenad Brdarski, managing director at digital innovation agency Boxhain Ltd., is embracing the new world order and all the increased flexibility it entails. He says he will mix more freely between his home and the office in the future.
“It no longer feels unprofessional to have a non-office background in video calls with clients,” he said from his home in London’s Tufnell Park area.
For Schwarz Knudsen, that flexibility adds yet another layer of data and number crunching by the traders, analysts and their computer models.
“Now you need the data points for millions of citizens that are working from home,” he said. “That requires more sophisticated forecasting tools, and a more complex forecasting process.”
— With assistance by Jesper Starn, and Rachel Morison
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April 13, 2021 at 11:00AM
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Flexi Work is Making Power Trading More Tricky in Europe - Bloomberg
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