Europe Faces Full-Blown Energy Crisis
Amid a shortage of natural gas, lowered wind power output, outages at nuclear energy facilities and cold weather with winter just starting, power prices in Europe soared this week – and the worst may yet to come.
European prices for natural gas exceeded $2,150 per 1,000 cubic meters on Tuesday for the first time in history, according to Intercontinental Exchange’s London clearing house. The price at the Dutch TTF hub in the Netherlands, the benchmark gas price for Europe, soared some 27% in one day to nearly $210 per megawatt-hour in household terms.
The surge slightly subsided when markets opened on Wednesday, with January futures trading at around $1,970 per 1,000 cubic meters as of 08:00 GMT.
Tuesday’s jump in prices came about after gas deliveries to Germany via the Yamal-Europe gas pipeline from Russia were halted. Flows were diverted eastward to Poland, and Russia’s Gazprom hasn’t booked additional pumping volumes for Wednesday, data from the Russian gas transmission operator Gascade shows.
Some critics say Gazprom has been reducing gas flows to Europe amid the delay in the certification of its new European pipeline, Nord Stream 2. However, it has repeatedly stressed that it supplies gas to Europe according to consumer demand and in accordance with existing contracts.
Meanwhile, no new gas flows to Europe mean utilities are forced to drain their gas storages, which are already at seasonal lows. Some of them, including France’s EDF, have had to restart fossil-fuel-burning generators to avoid grid disruption. France is usually considered an exporter of power on the European continent, but it has been short on energy since its major power utility, Electricité de France SA, halted four nuclear reactors, constituting 10% of the country’s nuclear capacity, straining power grids. According to ZeroHedge, 30% of its nuclear capacity will go offline in the coming weeks, while Germany is also set to lose nearly half of its own capacity next year.
To add fuel to the proverbial fire, Germany’s power output from wind turbines has dropped to five-week lows amid the cold weather. This put the power grid under strain, hiking power prices by 30% to a record $487 per megawatt-hour.
It appears the energy crisis in Europe is only gaining speed, with experts warning that the worst is yet to come in late January-early February, when the temperature tends to be at its lowest. Meanwhile, renewable sources such as solar and wind power will be at a standstill due to meteorological conditions, with windless days and the sun unable to push through the clouds.