Europe has never paid so much for electricity as in 2021.
The average cost of power for delivery in the short term soared to record levels this year, rising over 200 per cent in Germany, France, Spain and the UK. In the Nordic region – where vast supplies of hydro power tend to cap prices – costs surged 470 per cent from a year earlier.
The crunch is leaving consumers and heavy industrial users with rising bills heading into 2022. Metals smelters from France to Spain have already been forced to curb output, while some fertilizer producers were forced to halt output altogether. Norsk Hydro’s majority-owned plant in Slovakia was the latest casualty, announcing on Thursday that it would further curb production.
And there is little relief in sight. Even as the year ends with mild weather – easing demand for heat and power – households are set to face eye-watering price increases next year when wholesale costs get passed on. Industries will also need to grapple with even tighter supplies in January, when about 30 per cent of the French nuclear fleet will be offline.
Day-ahead power prices in Germany averaged €96.85 a megawatt-hour this year, while costs in France were €109.17, according to Bloomberg calculations based on daily auctions. Spanish users paid €111.93, prices in the UK averaged £117.82, while costs in Nordic region came to €62.31.
Europe’s energy crunch was a result of shortages of natural gas just as demand rebounded following 2020’s Covid-19 lockdowns. The crisis was also aggravated by lower than normal wind speeds and nuclear power outages that have strained power grids, forcing the region’s energy companies to burn polluting fossil fuels.
As companies burned coal, lignite and even oil to keep the lights on, the cost of buying permits to pollute surged. Carbon futures – already facing price increases because of the Brussels climate agenda – more than doubled this year to about £80 per metric ton ($90.5), boosting the cost of electricity.