Why have electricity prices in Europe been on the rise recently? Mainly because electricity demand in Europe soared in July, and supply and demand affected market electricity prices.
The Russia-Ukraine war has led to high energy prices in Europe, including electricity prices and gas prices. Summer is approaching, and the increase in electricity demand will further increase the demand for gas for power generation. As of July 27, the European natural gas inventory level was 84.78%, +2.61% week-on-week, which was at a historical high. The slowdown in inventory replenishment was mainly due to the slow recovery in demand and the slowdown in the pace of inventory replenishment due to the slowdown in the previous expectation that natural gas prices would continue to decline .
According to the survey of the research institute, in the past July, the high temperature for many consecutive days caused the electricity demand in Spain and Italy to reach a record peak on July 19, and the electricity demand in other EU countries also increased during this period.
In France, photovoltaic power generation reached a record high weekly, but photovoltaic power generation and wind power generation fell in most of the EU countries. These factors led to higher electricity market prices in the EU in the third week of July than in the previous week.
European heatwave, red alerts and record temperatures, countries around the Mediterranean Sea are experiencing an intense heatwave in July.
In France, thermometers reached 40.6°C in Verdun and Tiranges, 40.7°C in Luc, and Rome, Italy, broke the high temperature record with 42.9°C.
In Sardinia, 45.8°C was measured, and even 46.3°C was measured in Licata, Sicily.
In Spain, Catalonia hit the 45°C mark for the first time since measurements began, with Figueres at 45.3°C.
By the end of July, the summer temperature continued to rise and the number of tourists increased, and the electricity price in the European electricity market rose.
According to the electricity price data for European residents in July released by HEPI, the average European residential electricity price in July was 24.86 cents/kwh, an increase of 2% month-on-month, and the average electricity price of 27 European countries was 26.34 cents/kwh, an increase of 2% month-on-month. Among them, the average residential electricity price in Germany in July was 38.6 cents/kwh, a slight decrease of 2% month-on-month, but the electricity price in Germany is generally at a relatively high level. In general, the average electricity price for residents across Europe has picked up, and the demand for medium and long-term household storage may increase.
In addition, due to the impact of rising natural gas prices, many European countries have switched to coal and oil-fired power generation, which has further pushed up electricity prices. Especially for countries that rely on natural gas imports, the cost of electricity has skyrocketed. This situation of rising electricity prices and tight energy supply has not only brought burdens to the residents of European countries, but also put great pressure on the production and competitiveness of enterprises. Many factories and manufacturers were forced to cut production, and some even had to stop production, which even affected the reduction of jobs in Europe.
In this context, European governments have taken measures to deal with the problem of rising electricity prices. For example, on March 14, 2023, the European Commission proposed a draft reform of the European electricity market, hoping to solve the concerns of residents, industries, and investors about short-term electricity price fluctuations by optimizing the design of the electricity market, improving products, services, and regulatory systems, thereby promoting more reforms. The development of large-scale renewable energy will enhance the competitiveness of Europe's overall industry. Some European countries have also introduced emergency subsidy programs to ease the burden on residents and businesses. At the same time, the government also encourages energy transformation and investment in renewable energy to reduce dependence on traditional energy sources and improve the stability of energy supply.
Nevertheless, it is an indisputable fact that the performance of the European market still shows that the proportion of new energy power generation in the European electricity market continues to increase. Faced with the challenges brought about by the rapid development of the photovoltaic market and the rapid growth of clean energy installed capacity, European governments need to continue to promote the process of energy transformation to solve problems such as power supply and demand balance, grid stability, and reasonable electricity prices.
In conclusion, the rise of electricity prices in Europe has attracted widespread attention and brought certain challenges to the economies and energy markets of various countries. The government and relevant parties should also strengthen cooperation and take more measures to stabilize electricity prices and promote sustainable development of energy supply.
