Electricity demand keeps falling. We look at the causes, the effect on prices and what the trend means for consumers, businesses and the market.
The downward trend in electricity demand continues
Spanish electricity demand fell 1.3% last August against the same month a year earlier, once temperature and working-day effects are stripped out. Year to date, Spain recorded demand of 164,232 GWh, 4.1% below the same period in 2022. Adjusting for calendar effects and temperatures, demand is down 3.5%[1].
Looking at demand among large consumers through the IRE indicator [2], July showed a year-on-year fall of 9.2%, against the 10.4% contraction recorded in June. Over the last 12 months the fall is 10.2%: 11.2% attributable to industry and 10.2% to services.
Three causes are driving this downward trend:
Growth in self-consumption. Domestic, tertiary and industrial self-consumption installations have grown exponentially through 2022 and 2023. All self-consumed generation feeds directly into the demand figures recorded by REE, even though there is currently no model able to isolate the effect of self-generated consumption. For reference: residential self-consumption accounted for 1,024 MW in 2022 and industrial self-consumption for 1,625 MW. In 2022 self-consumption installations generated 4,564 GWh in total — output equivalent to 1.8% of electricity demand, according to APPA Renovables[3].
Improved energy efficiency. Industry has been doing its homework on efficiency for years, mainly because it feeds straight into costs and competitiveness. Spain's final energy intensity figures show it: 123.5 toe/€M in 2000 against 69.8 toe/€M in 2018, an average annual decline of 3.2%[4].
Lower industrial activity. Economic activity in eurozone industry is slowing: July marked a fourth consecutive month of deceleration, driven mainly by weak demand — particularly export markets and new orders. One factor behind falling sales was reduced demand from abroad. Companies have responded by cutting purchases and, for a second consecutive month, reducing headcount.
The fall in electricity demand we are seeing has several causes, from economic and seasonal factors to changes in consumption habits and energy policy. How those factors combine will shape demand significantly from here. It is worth watching these indicators closely to see whether the downward trend holds.
[1] REE data. Red Eléctrica de España. https://www.ree.es/es
[2] Índice de Red Eléctrica — an indicator providing advance information on how companies with medium-to-high electricity consumption are evolving, broken down by activity (industry and services).
[3] APPA Renovables. Spanish renewable energy association. https://www.appa.es/
[4] La transició energètica a Catalunya. Association of Industrial Engineers of Catalonia.
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