More than tenfold compared to a year ago: the price that gas reached on August 16 on the European reference market. Futures contracts traded in Amsterdam peaked at EUR 251 per megawatt hour and then closed at EUR 223 per megawatt hour: at the end of August 2021, the price fluctuated around EUR 27. Electricity, on the other hand, exceeded the threshold of 540 euros per megawatt hour at Leipziger Platz, the seat of the European Energy Exchange. In Italy, the average national price was just under 538 euros.
Germany will not stop nuclear power
In this highly volatile scenario, Germany is considering keeping open the three nuclear power plants that should have been closed in December, as planned when Angela Merkel was still in government. We are examining very carefully whether it makes sense to extend the operation of the three nuclear power plants that are still active – said Federal Chancellor Olaf Scholz – because we could fully utilize their capacity this winter. According to the Wall Street Journal, the decision has yet to be formally approved by the government and will likely require a positive vote in parliament. The statement made yesterday by Scholz at a press conference in Stockholm testifies to Berlin’s fears about energy security: The member states of the European Union should show solidarity in the event of supply bottlenecks. And again, Germany has decided to add a surcharge to the bill for the gas levy from autumn in order to ensure the stability of the supply system. The increase is 2.4 cents per kilowatt hour and allows companies to pass the high gas purchase costs on to consumers. For Economics and Climate Minister Robert Habeck, the measure is medicine that is as fair and bitter as possible, but necessary in order not to let the German energy companies fail. Scholz announced that a third aid package for citizens and companies would soon arrive.
Energy because prices are flying
But why do energy prices keep rising? To weigh – explains Simona Benedettini, economist for energy – are conditional phenomena such as droughts, which have led to a drop in nuclear energy production in France and hydroelectric power in Italy. However, the biggest weight has been volatility in wholesale gas prices, largely due to fears of a sudden disruption in Russian gas supplies. And yesterday, Gazprom’s warnings also pushed up gas prices. The Russian giant (which has been cutting supplies to Europe for several weeks) has announced that European methane prices could rise by 60% again and exceed $4,000 per 1,000 cubic meters this winter. The company has reduced deliveries to Germany to just 20% of the capacity of the Nord Stream 1 pipeline due to maintenance issues. But according to Berlin, that’s an excuse.
the drought
But it’s not just tensions between the EU and Russia over the war in Ukraine that are driving energy prices up. The drought is also contributing to the crisis, as dry rivers and shipping are at risk. The fall of the Rhine in Germany, where coal ships are running at 60% of their capacity, causing fuel prices to spike and forcing utilities to use gas instead. The lack of water also affects the capacity of hydroelectric power. In Italy, the production of the approximately 4,500 existing plants fell by 40% in the first half of 2022, according to Terna.
France produces less energy
The water emergency has also hit the French nuclear industry. Until recently, Paris was able to cope with delivery bottlenecks from Russia without any particular problems thanks to nuclear power, from which it gets most of its electricity requirements. With the heat, however, the water in the rivers reached such high temperatures that it could not be used to cool the reactors. The activity of the power plants was drastically reduced. To the point that the Paris government had to implement an emergency regulation to keep five reactors running. Adding to the water emergency is the maintenance of about twenty of the 60 existing plants, leaving the French nuclear power plant producing well below capacity. The slump in electricity production is putting several European electricity markets under pressure and favoring rising prices. In fact, France is forced to turn to neighboring countries to meet domestic demand. Countries that previously relied on the French surplus.