Electricity prices surge to a fresh record in Europe

Electricity prices surged to a fresh record as Europe scrambles to keep the lights on in France, the region’s second-biggest market.

France, usually an exporter of power, is boosting electricity imports and even burning fuel oil.

The crunch comes after Electricité de France (EDF) said it would halt four reactors accounting for 10 per cent of the nation’s nuclear capacity, straining power grids already coping with cold weather.

A total of six oil-fired units where turned on in France on Tuesday morning, according to filing with Entsoe.

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“It’s illustrating how severe it is when they’re actually starting to burn fuel oil and importing from all these countries,” said Fabian Ronningen, an analyst at Rystad Energy. “All the unexpected maintenance is also causing extremely high cost of supply, which is reflected in the market prices.”

Europe is facing an energy crisis, with utilities relying on coal and even oil. About 30 per cent of France’s nuclear capacity will be offline at the beginning of January, leaving the energy market at the mercy of weather. To make matters worse, Germany is closing almost 50 per cent of its nuclear capacity before the end of the year.

German power for delivery next year surged as much as 6.8 per cent to €270 euros a megawatt-hour. Prices also gained as gas surged after shipments from Russia via a key pipeline reversed direction, with gas flowing eastward towards Poland instead. That’s making it harder for Europe to rely on the fuel to make electricity.

Prices

The power crisis is so severe that the French government has asked EDF to restart some nuclear reactors earlier than planned. Ecology minister Barbara Pompili said this weekend that in addition to the early reactor restarts, the country had contracts with some companies in which they agreed to cut production during peak demand hours in exchange for payments from the government.

Higher energy prices threaten to derail Europe’s economic recovery just as the coronavirus omicron variety is spreading. Trafigura’s Nyrstar will pause production at its zinc smelter in France in the first week of January because of rising electricity prices.

Norwegian fertiliser producer Yara International, which curbed output earlier this year, said it would continue to monitor the situation closely and curtail production where necessary.

Freezing weather this week is also sending short-term power prices surging as renewables can’t keep up. German wind output plunged to as low as 2,277 megawatts on Tuesday, the lowest since November 16th. – Bloomberg