Electricity prices soared to a new record high on Monday amid a rise in corresponding natural gas prices, reflecting the depth of the energy crisis that threatens to plunge the Old Continent into recession.
The price of energy for delivery next year in Germany thus increased by up to 3.7% during the day, to 477.50 euros per megawatt hour on the European energy exchange. This is an increase of almost six times compared to the price in the same period last year, while it is a doubling compared to two months ago.
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. Energy is also a key driver of inflation on the continent, having driven double-digit consumer price increases in previous months.
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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