Rising prices raise fears European energy crisis could also engulf electricity market

The European energy crisis, which has been dominated by skyrocketing prices for gas and oil so far,  could soon spill over to the electricity market, energy policy newsletter Tagesspiegel Background reports. This could cause further damage to already struggling industries in Germany. While direct blackouts remain unlikely, soaring power prices could force companies to reduce production. Prices for one megawatt hour (MWh) of electricity to be delivered in the fourth quarter of 2022 climbed from 250 euros in June to nearly 430 euros in mid-July, with so-called peakload prices even reaching up to 600 euros per MWh. The price hike would be unlikely to subside before the second quarter of 2023, the article predicts. Tim Steinert of energy consultancy Enervis told Tagesspiegel the high prices will lead to “serious questions” regarding the market’s reaction, adding it could be expected that “substantial” parts of industrial production will need to be throttled down for companies to weather the price hike.

However, he added the planned reactivation of coal power capacity means Germany should still be able to cope with the situation in a market-based manner, meaning customers could achieve the most efficient allocation of available supplies through balancing demand through the price. From a European perspective, France’s ailing nuclear reactor fleet, which is struggling to cope with the current heatwave and must endure temporary shutdowns of individual nuclear plants, could contribute to a volatile situation on the continent’s power grid, the article added.