Major European electricity markets are seeing increasing turmoil amid rising gas prices
BRUSSELS, 7 APRIL/WAM/ Imbalances have escalated in major European electricity markets due to the current dominance of different types of generation, while prices have been affected by a significant rise in gas prices amid the escalation of conflict in the region.
Average weekly prices in most European countries exceeded 80 euros/MWh, with the exception of Spain, Portugal and Northern Europe.
Meanwhile, Italy recorded the highest numbers by the end of March, and average weekly prices in most major European markets were falling amid declining buyout fund futures prices and higher solar and wind generation volumes.
The Iberian market recorded the lowest values in the fourth week of the month, with daily prices below 10 €/MWh.
According to expectations, gas supply disruptions resulting from the war will lead to long-term fluctuations in European electricity markets, and TTF futures prices exceeding 50 euros per megawatt hour will affect electricity costs in most countries.
Although the European energy sector is less reliant on gas, Europe’s ability to shift to coal-fired power generation has declined sharply since 2022.
Gas-fired power plants continue to determine prices in Italy, the UK, and to a lesser extent in Germany, where they remain a vital component of the system’s balance.
In light of the new energy crisis, the European Commission in Brussels announced a series of measures in response. Specifically, the European Executive pledged to make state aid more flexible and to cooperate more closely with Member States developing national programs to mitigate the impact of fuel costs on electricity production. European Commission President Ursula von der Leyen announced this after the recent EU leaders summit.
The second component will be network charges, which average about 18%. Member States will be allowed to reduce them for energy-intensive industries, and a legislative proposal will be prepared to improve the efficiency of the network infrastructure.
The third component of prices is taxes and duties on electricity, which average around 15% across the EU, with the situation varying from country to country. The European Commission will propose lowering tax rates on electricity and plans to ensure lower taxes on fossil fuels.
In the context of rising energy prices, the European Commission also announced steps to reform the Emissions Trading System (ETS).
European Energy Commissioner Dan Jorgensen said that Europe must prepare for a long energy shock caused by the war in the Middle East, and according to him, the Union is evaluating all options, including rationing fuel and releasing more oil from emergency reserves.
European countries have already begun to take steps to mitigate the effects of the war and its impact on families and companies. For example, the government of Spain, a country more prepared for such a shock, especially thanks to renewable energy, approved an ambitious package of 80 emergency measures worth 5 billion euros at the end of March, specifically, including an 80% reduction in network fees for energy-intensive industries, which will lead to savings of approximately 200 million euros.
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