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Electricity Use and Economic Activity Fall Across EU — but UK Is an Outlier

Source: Entso-e, Euler Hermes, Allianz Research

*Note: X-Axis represents European countries (DE=Germany, UK=United Kingdom, ES=Spain, IT=Italy, FR=France)

The U.K. is registering lower levels of activity compared to the EU — and is forecasted to see a 20% decline in GDP for Q2 this year. Compared to neighboring countries, the U.K. has had one of the longest and strictest lockdowns, according to a Euler Hermes report, which used electricity production data to measure relative levels of activity by country. 

The data shows the U.K. as a regional outlier, with “a -21% drop on average in both energy production and consumption since mid-March, compared to -17% in France and -11% in Germany,” according to the report. This has been caused largely by closures of office buildings, schools, factories and retail centers. Factors also include the length and severity of the shutdown, which has been extended to June 1.

On a larger scale, coronavirus has delayed the Brexit negotiations and complicated the transition period, as economic pressures from the pandemic continue to drive the U.K. and EU apart. With the current transition plan set to expire at the end of 2020, the report notes that an extension into 2021 looks likely.

Business Owners in Sub-Saharan Africa Lose Livelihoods, Despite Tighter COVID-19 Containment

Source: World Bank

Revenue declined for more than 70% of the households that rely on non-farm family businesses in Gabon, South Sudan, Malawi, Uganda, Zambia, Mali and Madagascar, according to surveys conducted in May and June 2020. Kenya experienced the highest job loss rate at 62%, according to the World Bank. In general, COVID-related job losses in sub-Saharan Africa were higher in urban areas and among female workers.

Although COVID-19 cases were not as high in Africa as in other regions of the world, the pandemic has taken a major economic toll on countries in sub-Saharan Africa. These countries experienced a devastation in livelihoods, food security and human capital due to the loss of global demand and local efforts to contain the disease. Food insecurity tripled in Nigeria, Ethiopia, Uganda and Malawi compared to 2019. 

Countries that were hit the hardest economically had significant domestic outbreaks, numerous oil exporters and were dependent on the travel and tourism industry. Economic activity is predicted to rise by 2.7% in 2021 — predominantly driven by export growth — but this could be jeopardized by limited vaccine distribution.

Demand for Precious Metals Is Expected to Drop As Economy Recovers

Source: World Bank, World Gold Council

The value of gold reached an all-time high of $2,067 per ounce in August 2020. At the beginning of the COVID-19 pandemic, gold “benefited from its status as a safe-haven asset and was buoyed by continued monetary easing by major central banks,” according to the World Bank. However, due to some initial signs of economic recovery, the demand for gold has started to decline, with its value seeing a corresponding drop. 

Other precious metals have seen price fluctuations since the start of the pandemic: The cost of silver reached a seven-year high of $29 per ounce in August 2020, but has since declined. In contrast, the cost of platinum dropped in April 2020, but has recovered slightly due to the rise of global auto sales and its use in that sector. 

Although the costs of precious metals dropped at the end of 2020, they have remained higher compared to 2019. Experts anticipate demand for precious metals continuing to decline in 2021 as the economy pursues its recovery. 

Demand for Coal Remains Resilient in Asian Countries

Source: IEA

Global coal demand fell 5% in 2020 — the biggest decline since World War II. Europe and the U.S. saw significant declines in demand, but demand for coal in Asia remained steady, according to the International Energy Agency. 

Transitioning to renewable energy sources, a major drop in electricity use due to COVID-19 lockdowns and lower natural gas prices all contributed to declining demand for coal in 2020. Whereas demand for coal fell by over 15% in North America and Europe, IEA expects China’s coal use to have declined by less than 1% for 2020. China and other Southeast Asian countries combined account for about 75% of global coal demand. 

Despite the negative impact that coal use has on global climate goals, the IEA expects the industry to rebound in 2021 — depending on electricity demand and industrial output post-pandemic. Driven by China, India and Southeast Asia, coal consumption is expected to rise by 2.6% this year.

Cost of Solar Electricity Plummeted in the Last Decade

Source: OurWorldinData.org

Electricity prices are expressed in ‘levelized costs of energy’ (LCOE). LCOE captures the cost of building the power plant itself as well as the ongoing costs for fuel and operating the power plant over its lifetime.

The price of solar electricity dropped by 89% in the last 10 years, becoming the world’s cheapest source of electricity. A learning curve related to the sector’s technology, involving “innovation that reduce[d] the amount of labor, time, energy, and raw materials needed to produce the technology,” resulted in a steep decline in its cost, according to author Ramez Naam. Offshore wind power saw a similar technology learning curve with prices falling by 70%. 

The price of electricity from coal has remained nearly the same, dropping only by $2 per MWh to $109 over the last 10 years. The costs of electricity from wind and solar are now significantly lower than electricity from coal at $41 and $40 per MWh, respectively. 

Increased use of solar and wind electricity would lead to more jobs, lower prices for consumers and a more sustainable environment. “The more renewable energy technologies we deploy, the more their costs will fall. More growth will mean even more growth,” wrote Our World in Data.

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