European electricity prices rose to a new record on August 26, signaling a difficult winter across the continent.
Germany’s electricity price for delivery next year trades at $995 per megawatt hour (MWh), while it’s in France rising to $1,100, more than 10 times more in both countries than it was last year.
In the UK, the government energy regulator Ofgem said it would nearly double the price ceiling for electricity and gas from October 1, to an average of $4,197 a year. Ofgem explained that the reason for the increase was that global gas prices skyrocketed after many countries lifted Covid-19 restrictions and Russia tightened supply.
The Czech Republic, which holds the rotating presidency of the European Union, announced on August 26 that it would convene an EU energy crisis summit “at the earliest possible date”.
Energy prices soared in Europe amid Russia’s reduced supply of natural gas to the continent and concerns that Moscow would cut more sharply in the winter, when relations between Russia and the West are strained because of the Ukraine conflict. .
One-fifth of Europe’s electricity comes from gas-fired power plants, so a drop in supply will inevitably lead to higher electricity prices. European gas prices on August 26 reached 341 EUR/MWh, close to the record level of 345 EUR in March.
The impact of the war in Ukraine is not the only reason for the increase in electricity prices in France. The closure of several nuclear reactors due to corrosion problems contributed to the high prices of electricity in France as electricity production fell dramatically.
Only 24 of the 56 reactors operated by energy giant EDF were operational as of August 25. France, which has traditionally been an exporter of electricity, is now an importer.
“Winter will be a difficult period for all European countries,” said Giovanni Sgaravatti, a research fellow at the Bruegl strategic consulting center based in Brussels, Belgium. “Price will remain high, possibly even higher.”
Bruegl’s research shows that EU countries have allocated EUR 236 billion between September 2021 and August 2022 to protect households and businesses from price shocks. European energy prices began to rise when many countries lifted Covid-19 restrictions and skyrocketed after Russia launched a military campaign in Ukraine.
In recent weeks, EU countries have continuously announced many energy saving campaigns, encouraging people to reduce electricity consumption in the winter. Germany on August 24 announced that the temperature in the winter public administration office will be limited to 19 degrees Celsius, and hot water will be turned off. Private swimming pools are also banned from turning on the heating from September and for six months.
Finland encourages people to reduce the temperature of the heating system, take a quick shower, and go to the sauna less often. French households are protected by an energy price ceiling from December 31, 2021 to present.
Many industries are affected by rising energy prices. Factories that produce ammonia, the ingredient that makes fertilizers, announced shutdowns in Poland, Italy, Hungary and Norway this week.
HSBC bank warned of an “inevitable recession” in the euro area, predicting a contraction in the economy in the fourth quarter and first three months of 2023.
Hong Hanh (Theo AFP)