Electricity prices have risen to new record highs. It is to be expected that German consumers will have to adjust to significantly higher electricity bills in the coming year and in the following years. The reasons are, on the one hand, the high gas prices, because gas is necessary to generate electricity. Dutch gas prices rose 6 percent on Tuesday – the sharpest rise since March. Electricity prices have been rising for months as gas prices have more than quadrupled. The situation is being exacerbated by the current heat wave.
According to Bloomberg, the prices for electricity purchases in Germany next year rose by 5.2 percent to 502 euros per megawatt hour on the European electricity exchange (EEE) on Tuesday. It is the first time that the magic 500 euro mark has been exceeded. Bloomberg figures show that prices continue to rise massively every day. The price is already almost six times what it was in the same period last year. In the past two months alone, the price of electricity has doubled. Because rising electricity prices are affecting all industrial production, this development is likely to drive up inflation further. As a result, inflation is expected to move into double digits soon.
The high energy costs are becoming an acute problem for landlords of social housing. They are therefore calling for a support fund for housing companies that are having liquidity problems due to high heating and gas costs. “Landlords are increasingly finding themselves in a hopeless situation,” says Andreas Breitner, director of the Association of North German Housing Companies (VNW), according to the association’s announcement. “They have to pay the massively increased energy costs billed by energy companies immediately, but they will only get the money back from the tenants with the heating bills next year. It is then questionable whether, in view of the wave of costs in energy consumption, these can then be settled at all. Smaller companies in particular can get into financial difficulties as a result. They simply lack liquidity due to the explosive increase in energy costs. An illiquid company faces bankruptcy. We need a pragmatic and unbureaucratic solution quickly. A support fund would be such a solution.”
The question of high energy costs is currently overshadowed by the question of whether Europe’s energy suppliers will be able to generate enough electricity at all this winter. The ongoing heatwave in Europe exacerbated shortages in July, disrupting generation capacity while boosting electricity demand. Low wind speeds due to high temperatures have reduced electricity generation from wind power, while falling water levels along the Rhine have disrupted the supply of coal to power plants in Germany, William Peck, an electricity market analyst at ICIS, a commodity analysis firm, told the Financial Times (FT).
The prevailing heat waves are also endangering nuclear energy production. France’s nuclear capacity is currently extremely low due to a shortage of cooling water. This limits the possibility of electricity exports in the coming months and also poses a not inconsiderable security risk. In France, the government of President Emmanuel Macron plans to nationalize completely Electricité de France (EDF), the nuclear energy supplier that has come under pressure. EDF is struggling to keep its facilities running in the sweltering heat. There is also a serious conflict between the government in Paris and the company: EDF is suing its own government for 8.3 billion euros following the company was forced to sell energy to consumers at a loss. EDF filed a lawsuit for damages in January because the government had extended the existing price cap. Macron thus forced EDF to sell more electricity to competitors at below-market prices. The measure was intended to relieve households and curb inflation. In exchange for its monopoly position, EDF has to sell electricity to competitors at deep discounts. The government had increased the upper limit for the rebate by a fifth in January, causing financial difficulties for the company.
Things are also bubbling in Great Britain: it is to be expected that electricity prices might rise by up to 80 percent from October. The government has therefore decided that the price cap for household energy should almost double in early October due to rising wholesale costs.
However, the announced upper limit will not be sufficient for many low- and medium-income earners. They have therefore joined forces in a protest movement. They want to refuse to pay their bills en masse. The “Don’t pay UK” initiative calls for energy costs to be reduced to an affordable level. To this end, the initiative wants to gain one million supporters. These are said to pledge not to pay more if the government makes another massive hike on October 1. As of Tuesday, 107,000 people had already signed the appeal. Recalling a good British tradition, the protesters write on their website: “Mass refusal to pay is not a new idea. It already existed in the UK in the late 1980s and 1990s, when more than 17 million people refused to pay the poll tax – helping to overthrow the government and reverse its toughest measures.”
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