German electricity prices have risen to record levels, with the ongoing heat wave and drought severely limiting one of Europe’s main waterways for transporting energy supplies, Bloomberg reports.
The summer heatwave is putting pressure on Europe’s energy system, while Russia is cutting gas exports to the continent. This is set to hit the finances of households and businesses across Europe, a crisis that will intensify as energy demand rises over the winter.
Almost every aspect of the energy system is contributing to rising prices right now. Another factor weighing on prices is the Rhine River, which is set to become virtually impassable later this week, cutting off coal supplies to plants that would have to run longer to enable Europe to conserve natural gas. While they can still source the fuel by road or rail, it is more expensive to do so that way.
“Low water levels in the Rhine have reduced the ability of these plants to receive enough coal to operate at optimum efficiency,” AME Group analysts said.
Against this backdrop, the German futures contract for next year rose as much as 3.2% to 420 euros per megawatt hour on the European Energy Exchange. This is five times higher than last year.
According to Silje Eriksen Holmen of Oslo-based Volue, the drought doesn’t look like it will end anytime soon. This is because it is not just this summer that has been particularly hot and dry, but there has been a much longer period that has exacerbated the effects of the drought. “The problem is not a dry July or a few weeks or months,” said Eriksen Holmen. “It’s been a really dry year.”
Wind power is also below average for this time of year in parts of Europe, including Germany and the UK, two of the biggest producers. This leaves the system more dependent on fossil fuel plants.
At the same time, more than half of France’s nuclear fleet is out of service for maintenance, leaving the country dependent on imports from its neighbors.
Source: Capital
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