The ingredients of the “perfect storm” are multiplying and pressure is mounting. The surge in natural gas above €90 yesterday for the first time since December 2022 is certain to prompt more governments to announce measures rather than wait for a central EU response.
Although the price on the Amsterdam exchange later retreated to €87, the bigger picture has not changed. If prices settle at levels close to those seen four years ago, power generation from this fuel will increasingly translate into prices above €200 in Greece’s wholesale market when renewable generation is not strong.
This is the third day in a row, and the fourth in the past week, that the wholesale price has hit €240.56/MWh today, following yesterday’s annual record of €247.82 and €406.48/MWh during the evening peak. Renewables account for just 39% of the energy mix, while natural gas accounts for 41%.
In reality, market sources told euro2day, gas prices staying at €86-90 “lock” wholesale electricity prices firmly above €220 during hours (and days) without renewable generation.
If gas remains at these levels, the 10 days in the past month when wholesale prices exceeded €200 will soon multiply. And the situation is even worse than this snapshot suggests, with households, professionals and businesses set to face higher bills in November for the fifth consecutive month.
That is because not one of the factors shaping electricity prices—gas, nuclear output, water levels and CO2 is showing any improvement, as euro2day.gr reported yesterday—if anything, the opposite is true.
From expensive gas and low nuclear, hydro and wind generation in neighbouring countries to high CO2 costs, everything points to a deepening price crisis.
And this is before the months of peak demand have even begun, fuelling fears that the energy shock could reach 2022 levels, with natural gas, of course, as the driver.
Every country is going its own way
The implications are clear for a Europe that has so far heard little from Brussels beyond platitudes and advice to “turn off the lights and cut consumption”. This is especially true for the eight European countries—Greece, Spain, France, Italy, Bulgaria, Estonia, Finland and Slovakia—that have parliamentary or presidential elections in 2027.
In response, the trend towards going it alone is clear. One government after another is taking its own path, as countries need to tackle the crisis now rather than wait for any central intervention.
Confirming that the EU’s “internal energy market” is common in name only, the Germans are subsidising transmission and distribution charges, the Portuguese have adopted a kind of cap on retail prices, while the Italians have significantly changed course, securing the Commission’s green light to subsidise the cost of natural gas for electricity generation from 2027.
The move is expected to open the floodgates, with many other countries likely to seek something similar, as euro2day.gr reported—namely, to adopt the “Iberian model”.
The model involves covering the cost of natural gas purchased by the country’s power generators above a certain price, thereby keeping wholesale electricity costs down and, in turn, bills for households and businesses.
Although the details of the Italian scheme have yet to be made public, yesterday’s ICIS analysis tempers the enthusiasm of those who were quick to celebrate, explaining that the benefit for consumers in Italy will be just €2.9/MWh.
The Visegrád Four initiative
The situation is even more difficult in Eastern Europe, where the Visegrád countries—Hungary, Poland, Czechia and Slovakia—called at the recent summit (15-16 October) for measures to reduce electricity bills in the region to be reviewed.
A few days later, on Monday, Slovakia and Hungary asked Brussels for greater flexibility in phasing out Russian natural gas, arguing that their landlocked geography and dependence on existing supply routes make diversification more difficult and costly.