French power jumped to a record on Tuesday after a surge in gas prices boosted the cost of generating electricity across the continent.
(Bloomberg) — French power jumped to a record on Tuesday after a surge in gas prices boosted the cost of generating electricity across the continent.
Electricity in France for next year jumped 4.6% to 495 euros ($502) per megawatt-hour, a new all-time high. Less than half of Electricite de France SA’s nuclear fleet is available, meaning that France needs to import power from neighboring countries at peak times.
Higher energy costs in Europe could translate into more pain for households already battered by a surge in living costs caused by the highest inflation levels in decades. Germany, Europe’s biggest economy, has already triggered two stages of its gas emergency plan and could enact the last step if there’s a clear deterioration in the situation.
The impact of higher prices in France will reverberate through other markets. Last week France’s power grid operator made an emergency call to secure power supplies from Britain. This highlights the difficulties ahead in keeping the lights this winter on when supplies get tight.
Benchmark gas prices advanced to the highest level in more than four months, as Europe braces for a further reduction in Russian supply. Industries, households and businesses could soon feel the impact of shortages as European Union energy ministers agreed on emergency regulation that could force 15% cuts in gas consumption through the winter if Moscow halts gas deliveries.
“We expect some level of demand destruction following through as a result of high fuel prices,” said Wood Mackenzie analyst Shirley Zhang. “Consumer energy costs are already seeing a significant rise almost entirely driven by high procurement costs.”
German power for next year rose to the highest in about three weeks, increasing the prospect of demand destruction as prices bite. The contract rose as much as 7.6% on the European Energy Exchange AG to trade at 368.50 euros per megawatt-hour, just shy of a record.
As gas prices have jumped, countries like Germany are trying to rely more heavily on alternative cheaper fuels, even if they’re more polluting, to secure energy supplies ahead of winter.
The rise in power is pulling up the price of coal, threatening to make Europe’s emergency energy planning more expensive. Coal for delivery to northwest Europe next year jumped 5.2% to trade at $290 a ton.