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All over Europe, energy prices are soaring. On Monday, the French gas regulator announced for October a new increase in regulated sales tariffs (TRV) – which have already jumped since the beginning of the summer. In question: the general explosion, throughout Europe, in gas and electricity prices.
As reported by L’Express in mid-September, wholesale gas prices reached 57 euros per megawatt hour on the TTF (Title Tansfer Facility) market in the Netherlands, the European benchmark – against 13 euros last year. The increase in wholesale prices has direct consequences on the selling prices practiced in each European country. In France, after a significant drop in the months following the first confinement, they returned to their pre-pandemic level around January 2021.
On July 1, the price of gas in France exceeded 100 euros, its level in January 2019. Since then, it has continued to increase, with consequences for the prices adjusted each month by Engie. The regulated tariff of local distribution companies (ELD), which supply gas in certain territories (for example, in Strasbourg, Grenoble or Bordeaux), changes by quarter. Here too, invoices will increase significantly in October compared to July, indicates CRE in its note published on Monday. The same trend is observed everywhere in Europe: the continent, reminds the Energy Regulatory Commission, is dependent on variations in market prices.
But it’s not just gas. Wholesale electricity prices reached 80 euros per megawatt hour on average over the first week of September 2021 – against 45 euros a year earlier – according to data from the Electricity Transmission Network (RTE). As for gas, the increase is reflected in the bills of individuals. Electricity TRV concerns 70% of French households. It must be adjusted on February 1 by CRE. “According to our estimates, it should be increased by 7 to 10% to absorb the increase in wholesale prices,” said Julien Teddé, managing director of the Opera Energie brokerage at L’Express in September.
France is not the worst off: if the increase in the price of electricity has been constant since 2008, it still remains below the European Union average: 188.65 euros per megawatt hour in 2020, against 217.5 at EU level. Germany, the country where electricity is the most expensive in Europe, is the most exposed to these price explosions.
And the increase is not temporary. Asked by RTL’s Le Grand Jury on Sunday, European Commissioner for the Internal Market Thierry Breton said “this situation of tension on energy can last all winter”. There are several reasons: “There was the Covid crisis, we closed oil wells and gas wells and some can no longer reopen them. Structurally, there is already a drop in supply, explained Thierry Breton: Second element, there are a lot of renewable energies “on the continent,” such as wind turbines. And it turns out that during the last six weeks, there has been no wind in Europe. much less electricity was produced.
In addition, some European countries very dependent on Russian gas “are paying the price” today, according to the European commissioner. Europe is mainly supplied with gas by Russia (43% in 2020) and Norway (20%). However, Moscow is suspected of consciously rationing its European customers, but affirms that the Nord Stream 2 gas pipeline, under the Baltic Sea, which will soon be commissioned, will allow tariffs to be rebalanced. In its note, CRE simply writes that “Norway and Russia (…) are not in a position to increase their exports to meet demand, for different reasons”.
Finally, says CRE, the situation in Asia has direct consequences for European gas. European gas storage levels in the spring were low “due to a particularly cold and long winter 2020-2021 in Europe”. However, it was “also severe in Asia”, which reduced the world supply. Europe therefore had to dig into its own stocks to meet demand. In addition, demand for natural gas in Asia remains high. “There is a very rapid economic recovery in Asia, which largely determines the consumption of gas on a planetary scale. Supply is struggling to keep up, which pushes prices up,” explained Julien Tedda at L’Express.
According to Thierry Breton, the energy crisis directly affects 36 million Europeans. Several countries have already acted. Jean Castex announced on September 16 that 6 million households would receive exceptional assistance of 100 euros to cope with rising costs. The Spanish government has reduced the tax on electricity bills from 5.1% to 0.5% and reduced VAT. In Italy, the executive intends to erase energy increases for low-income households and very small businesses, and temporarily lower VAT – to the tune of 3 billion euros. At EU level, the European Commission has announced that it is ready to validate “temporary measures” from member states to deal with the crisis. “We will activate the instruments so that States can intervene quickly with those who need it,” confirmed Thierry Breton on Sunday.