Energy prices in the EU are rising to a new high due to the tight gas supply

European electricity prices rose to new records yesterday as a heatwave cuts energy supplies and wildfires rage across France.

The gains reflect a tight market for natural gas, which is used to power power plants, as Russia cuts supplies while Europe works to replenish supplies for the winter.

A decline in nuclear reactor output and low wind and hydroelectric generation have exacerbated the bottleneck and raised the specter of intervention to reduce demand.

“If Russia shuts off gas and there may not be enough gas to meet all needs, then rationing will occur,” said Annegret Groebel, president of the Council of European Energy Regulators. Power outages “can be avoided, but of course they require a lot of preparatory work, which we are currently doing.”

The German benchmark electricity for the next year rose by a full 6.6 percent on the European Energy Exchange AG to a record value of €455 per megawatt hour.

The French contract rose by up to 7.8 percent to 622 euros per megawatt hour. That’s about $1,100 for the energy of a barrel of oil.

Heatwaves this summer have fueled demand and contributed to supply disruptions as key waterways – used to generate hydroelectric power, cool nuclear power plants and harness ship power – dry up.

France is in a particularly dire situation, with more than half of its nuclear fleet out of commission for maintenance. Normally the country would export electricity, but this year it has become a net importer, prompting neighboring countries to burn more gas to turn on their lights.

Wildfires have raged across the country, prompting President Emmanuel Macron to enlist help from across Europe to join 10,000 French firefighters to battle the blazes.

“Historically low nuclear power output and low water reservoirs across Europe are leaving a supply gap that can only be met with ready-to-use sources such as coal and gas,” said Patricio Alvarez, analyst at Bloomberg Intelligence.

“This contributes to the resilience of gas demand at a time of dwindling supply from Russia.”

Tight electricity supplies prompted the UK to issue a warning of a narrow supply/demand spread yesterday .

While National Grid ESO, the country’s grid operator, said there will be sufficient generation, it is another sign of the difficulties Europe’s electricity system is facing this year. Energy prices in the EU are rising to a new high due to the tight gas supply

Fry Electronics Team

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