When the economic recovery meets the bottleneck of the supply chain, with the winter heating season approaching, the pressure on the European energy industry is rising, and the hyperinflation of natural gas and electricity prices is becoming more and more significant, and there is little sign that this situation will be improved in the short term.
In the face of pressure, many European governments have taken measures, mainly through tax relief, issuing consumption vouchers and combating carbon trading speculation.
The winter has not yet arrived, and the gas price and oil price have reached a new high
As the weather gets colder and colder, the prices of natural gas and electricity in Europe have jumped to record highs. Experts generally predict that the energy supply shortage in the whole European continent will only get worse.
Reuters reported that since August, European natural gas prices have soared, driving the prices of electricity, power coal and other energy sources up. As the benchmark for European natural gas trading, the natural gas price of TTF center in the Netherlands rose to 175 euros / MWh on September 21, four times higher than that in March. With natural gas in short supply, natural gas prices in TTF center in the Netherlands are still rising.
Power shortages and rising electricity prices are no longer news. The International Energy Agency said in a statement on September 21 that in recent weeks, electricity prices in Europe have risen to the highest level in more than a decade and have risen to more than 100 euros / megawatt hour in many markets.
Wholesale electricity prices in Germany and France increased by 36% and 48% respectively. Electricity prices in the UK increased from £ 147 / MWh to £ 385 / MWh in a few weeks. The average wholesale price of electricity in Spain and Portugal reached 175 euros / MWh, three times that of six months ago.
Italy is currently one of the European countries with the highest average price of electricity sales. The Italian energy network and Environmental Supervision Bureau recently released a report that since October, the electricity expenditure of ordinary households in Italy is expected to rise by 29.8%, and the gas expenditure will rise by 14.4%. If the government does not intervene to control prices, the above two prices will rise by 45% and 30% respectively.
Eight basic electricity suppliers in Germany have raised or announced price increases, with an average increase of 3.7%. UFC que choisir, a French consumer organization, also warned that families using electric heating in the country will pay an average of 150 euros more each year this year. In early 2022, electricity prices in France may also rise explosively.
With the soaring electricity price, the cost of living and production of enterprises in Europe has increased sharply. Reuters reported that residents’ electricity bills have increased, and chemical and fertilizer enterprises in Britain, Norway and other countries have reduced or stopped production one after another.
Goldman Sachs warned that soaring electricity prices would increase the risk of power outages this winter.
02 European countries announce response measures
In order to alleviate this situation, many European countries are taking measures to deal with it.
According to the British economist and BBC, Spain and Britain are the countries most affected by the rise in energy prices in Europe. In September, the coalition government led by Pedro Sanchez, Prime Minister of the Spanish socialist party, announced a series of measures aimed at curbing rising energy costs. These include suspending the 7% power generation tax and reducing the value-added tax rate of some power users from 21% to 10% in the second half of this year. The government also announced temporary cuts in excess profits earned by energy companies. The government stated that its goal is to reduce electricity charges by more than 20% by the end of 2021.
The energy crisis and the supply chain problems caused by brexit have particularly affected the UK. Since August, ten gas companies in the UK have closed down, affecting more than 1.7 million customers. At present, the British government is holding an emergency meeting with a number of energy suppliers to discuss how to help suppliers cope with the difficulties caused by record natural gas prices.
Italy, which derives 40 per cent of its energy from natural gas, is particularly vulnerable to rising natural gas prices. At present, the government has spent about 1.2 billion euros to control the rise of household energy prices and promised to provide another 3 billion euros in the coming months.
Prime Minister Mario Draghi said that in the next three months, some of the original so-called system costs will be deducted from natural gas and electricity bills. They were supposed to increase taxes to help with the transition to renewable energy.
French Prime Minister Jean Castel said in a televised speech on September 30 that the French government will ensure that the prices of natural gas and electricity will not rise before the end of winter. In addition, the French government said two weeks ago that in December this year, an additional “energy check” of 100 euros per household will be issued to about 5.8 million low-income families to alleviate the impact on family purchasing power.
Non EU Norway is one of the largest oil and gas producers in Europe, but it is mainly used for export. Only 1.4% of the country’s electricity is generated by burning fossil fuels and waste, 5.8% by wind power and 92.9% by hydropower. Norway’s equinor energy company has agreed to allow an increase of 2 billion cubic meters of natural gas exports in 2022 to support growing demand in Europe and the UK.
With the governments of Spain, Italy and other countries calling for the energy crisis to be put on the agenda at the next EU leaders’ summit, the EU is formulating guidance on mitigation measures that Member States can take independently within the scope of EU rules.
However, the BBC said there was no indication that the EU would take any major and focused intervention.
03 many factors lead to tight energy supply, which may not be relieved in 2022
What causes Europe’s current predicament?
Experts believe that the rise in electricity prices in Europe has triggered concerns about power outages, mainly because of the imbalance between power supply and demand. With the gradual recovery of the world from the epidemic, the production in some countries has not fully recovered, the demand is strong, the supply is insufficient, and the supply and demand are unbalanced, causing concerns about power outages.
The shortage of power supply in Europe is also related to the energy structure of power supply. Cao Yuanzheng, chairman of BOC International Research Corporation and senior researcher of Chongyang Institute of finance of Renmin University of China, pointed out that the proportion of clean energy power generation in Europe continues to increase, but due to drought and other climate anomalies, the amount of wind power and hydropower generation has decreased. In order to fill the gap, the demand for thermal power generation surged. However, as clean energy in Europe and the United States is still in the throes of transformation, the thermal power units used for emergency peak shaving reserve power supply are limited, and the thermal power can not be made up in a short time, resulting in a gap in power supply.
The British economist also said that wind power accounts for about one tenth of Europe’s energy structure, twice that of countries such as Britain. However, recent weather anomalies have limited the capacity of wind power in Europe.
In terms of natural gas, the natural gas supply in Europe this year also decreased than expected, and the natural gas inventory decreased. The economist reported that Europe experienced a cold and long winter last year, and natural gas inventories decreased, about 25% lower than the long-term average reserves.
Europe’s two major sources of natural gas imports were also affected. About one third of Europe’s natural gas is supplied by Russia and one fifth from Norway, but both supply channels are affected. For example, a fire at a processing plant in Siberia resulted in a lower than expected supply of natural gas. According to Reuters, Norway, the second largest natural gas supplier in Europe, is also limited by the maintenance of oil field facilities.
As the main force of power generation in Europe, the supply of natural gas is insufficient, and the power supply is also tightened. In addition, affected by extreme weather, renewable energy such as hydropower and wind power can not be put on top, resulting in a more serious shortage of power supply.
Reuters analysis believes that the record rise in energy prices, especially natural gas prices, has driven the electricity price in Europe to a high level for many years, and this situation is unlikely to ease by the end of the year, and even the form of tight energy supply will not be alleviated in 2022.
Bloomberg also predicted that low natural gas inventories in Europe, reduced gas pipeline imports and strong demand in Asia constitute the background of rising prices. With the economic recovery in the post epidemic era, the reduction of domestic production in European countries, the fierce competition in the global LNG market, and the increase in demand for gas-fired power generation caused by carbon price fluctuations, these factors may keep the natural gas supply tight in 2022.
Post time: Oct-13-2021
