LAST UPDATE: 10.52
Electricity prices in Europe soared to a new record high on Tuesday amid a rise in corresponding natural gas prices, reflecting the depth of an energy crisis that threatens to plunge the Old Continent into recession.
Germany’s electricity price, a benchmark for the European market, hit a new all-time high on Tuesday for a fifth straight session as the natural gas rally shows no sign of abating.
More specifically, electricity for delivery in 2023 was previously up by up to 2.7%, at 490 euros per megawatt hour on the European energy exchange. The price has more than doubled since June, raising prices for both consumers and businesses, amid galloping inflation that has sent prices soaring for everything from food to fuel.
This is an increase of almost six times compared to the price in the corresponding period last year.
The market is riding on fears over whether, with gas supplies tight due to Russia’s curb on exports to Europe, the continent will be able to produce the amounts of electricity it will need for the coming winter. The production capacity of France’s nuclear plants is extremely reduced due to maintenance and other problems, which reduces the potential for energy exports for the coming months.
In Germany and the UK, day-ahead prices also hit record highs, reflecting strong demand for air conditioning, with heat waves and drought on the continent adding to the pressure.
Rising energy prices are being passed on to household bills, as well as the costs of almost all activities.
In Britain, the cap on consumers’ annual electricity and gas charges is set to almost double in early October due to huge wholesale costs. The wholesale price of electricity in the country for October has almost sevenfold and is around 591 pounds per megawatt hour.
European governments are looking for ways to ease the financial pain for households and businesses, but also the impact of soaring prices on their countries’ economies. In France, the state is moving towards the full renationalization of Electricite de France (EDF), the giant that also controls most of the nuclear power generation.
The extreme escalation of prices is not expected to reverse soon, emphasizes Rystad Energy analyst Fabian Ronningen, speaking to the Bloomberg agency. Reduced output across the continent in nuclear, hydroelectric and lignite plants cannot for now de-escalate the pressure, he adds.
And the price of the Dutch natural gas contract, a reference point for the whole of Europe, rose yesterday by up to 4.2%, having more than doubled compared to June.
Source: Capital
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