Europe’s energy crisis makes markets nervous ahead of winter


On August 10, 2021, a round bale of straw can be seen in front of a power plant operated by RWE AG near Rommerskirchen, Germany. Natural gas and electricity costs are skyrocketing across Europe.

Intan | NurPhoto | Getty Images

London-Europe’s electricity prices have skyrocketed to their highest levels in years due to the confluence of factors in recent weeks, from very strong commodity prices and carbon prices to low wind power.

In addition, record rises in energy prices are not expected to end soon, and energy analysts warn that market nervousness may continue during the winter.

October gas prices at the European benchmark TTF Hub in the Netherlands were seen to rise to record highs of € 79 ($ 93.31) at 1 MW on Wednesday. Contracts have increased by more than 250% since January, but both French and German benchmark electricity contracts have doubled, according to Reuters.

In the UK, which currently has the highest electricity prices in Europe, electricity prices are skyrocketing as the reliance on gas and renewables to generate electricity is high.

Britain’s electricity prices rose nearly 19% the day before, reaching £ 475 ($ 656.5) on Wednesday, according to Reuters. The deal was already trading near record highs shortly after a fire at the UK-France power link reduced electricity imports into the UK.

“Gasoline prices are by far the biggest factor,” Glenn Rixon, head of European power analytics at S & P Global Platts Analytics, told CNBC in an email.

Rixon said the rise in gas prices was also a “great impetus” to raise carbon and coal prices to record highs, but others such as low wind power across the continent and the unavailability of nuclear power plants. He said that there are also support factors for.

Europe’s carbon prices have nearly tripled this year as the European Union cuts its emissions credit supply. The EU’s benchmark carbon price exceeded € 60 per metric ton for the first time in the last few weeks and fell slightly below this threshold on Thursday.

EU emissions trading system World’s largest carbon trading programIt covers about 40% of the block’s greenhouse gas emissions and charges the emitter for every 1 metric ton of carbon dioxide emitted. Record carbon prices further make polluted energy sources less attractive, for example, when coal burns, it emits more carbon dioxide.

Rixon said the outlook for electricity prices in Europe this winter is “significantly dependent” on gas prices, adding that he expects gas prices to rise further in the coming months. “Apart from the” average “situation, prices range from low or negative prices per hour for high wind power to very high prices already seen when wind power is low and demand is high. Expected to fluctuate very much. “

How did we get here?

European gas prices have been accelerating since early April, when unseasonable cold weather conditions caused European gas in storage to fall below the pre-pandemic five-year average, indicating a possible supply shortage.

Since then, Europe has struggled to get the gas supply it needs in winter back to where it should be. Economic recovery as countries relaxed Covid-19 regulations also matched more than expected demand leading to gas shortages.

The output filtration facility of the gas processing unit of the Slavyanskaya compressor station (operated by Gazprom), which is the starting point of the Nord Stream 2 offshore natural gas pipeline. Construction of Nord Stream 2 is expected to be completed by the end of this year, according to Russian Deputy Prime Minister Alexander Novak.

Peter Kovalev | TASS | Getty Images

In addition to this, Russia Delay the supply of piped natural gas to the region, Raises the question of whether this is a deliberate move to reinforce the case for initiating the flow via Nord Stream 2. The controversial pipeline of transporting natural gas from Russia to Europe, bypassing Ukraine and Poland, is expected to be fully functional soon. Can solve some of the local supply problems..

Stefan Konstantinov, senior analyst at ICI Energy, a commodity intelligence service, told CNBC that the deficit “is straining the market as winter approaches.” “This, coupled with the enormous competition for LNG supply from Asia and South America, is pushing up gas prices.”

Climate crisis concerns

Earlier this month, the UK started an old coal-fired power plant to meet electricity demand due to soaring gas prices and sluggish wind power.

This move raises serious questions about the government’s commitment to the environment. In the climate crisis.. to make sure, Coal is the most carbon-intensive fossil fuel From an emission point of view, therefore Pivot proposals for renewable alternatives..

When asked how the decision to switch to coal in the UK could match the urgent need to dramatically reduce fossil fuel use, Constantinople said, “a little ironic. Isn’t that something? “

Activists march with flags and placards while marching on how nature is at stake at the Extinction Rebellion Nature Protest in central London.

Loredana Sangiuliano | SOPA Images | LightRocket | Getty Images

“With enough wind, we may be able to meet more than half or two-thirds of UK electricity demand on days with relatively low electricity demand, but what we are looking at instead is , Actually there is no wind and it is forced. Start a contaminated coal-fired power plant. “

“At first glance, it’s inconsistent with the government’s ambition to decarbonize, but it depends heavily on the intermittent nature of renewable energy: both wind and solar,” he said. I added.

In the UK concern Coal-fired power will be completely phased out by October 2024 to reduce carbon emissions.

“The basic impetus: high gas prices and high carbon prices, we at ICIS believe they will stay here for the next few months,” said Constantinople.

Analysts at Wood Mackenzie, a global natural resources consultancy Predict Gas prices in the UK and Europe “will continue to rise at current levels throughout the winter.”

“The recovery of UK gas production is important for this winter,” they added. “And in the future, investment in domestic gas supplies remains important to ensure a smooth energy transition to renewables and new technologies.”

Europe’s energy crisis makes markets nervous ahead of winter

Source link Europe’s energy crisis makes markets nervous ahead of winter


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