The price of electricity is soaring in Europe

Audio 04:20

In Spain, where half of households have subscribed to a free-price supply contract, the price of electricity has tripled in six months.

Here, electricity meters in a building in Barcelona.

© REUTERS - Albert Gea

By: Dominique Baillard Follow

8 mins

On the eve of the cold season, the energy bill is soaring on the European continent.

A big concern on the horizon for households, businesses and governments.

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In Spain, the price of electricity has tripled in 6 months. In Italy, the bill climbed 20% in the second quarter, it could take an additional 40% in October, warns the Minister of Ecological Transition. In France, on the spot market where energy companies buy power for immediate delivery, the megawatt hour is racing: it was worth 100 euros at the beginning of September, Wednesday September 15, it was worth almost double, 197 euros. A new peak triggered by the fire that ravaged one of the cables used to export current between France and the United Kingdom. A real disaster for the British, because they depend a lot on imports for their daily consumption, and France, thanks to its nuclear fleet, is their biggest supplier. It will take at least 15 days to repair.Power cuts are to be feared in the coming days among our neighbors across the Channel.

How to explain this sudden surge in the price of electricity?

This is mainly because of the tensions in the natural gas market. This cleaner-than-coal hydrocarbon is increasingly popular as a source of renewable energy shortfalls, and it powers many power plants in Europe. The lack of wind observed in Spain or the United Kingdom this summer caused the production of wind turbines to drop, and therefore led to a sharp increase in demand for gas in these two countries in particular. Exporters find it difficult to satisfy it, because wherever the economic recovery manifests itself, gas is bought, Asian customers snatch up cargoes of liquefied natural gas (LNG). And then the Russians like the Norwegians, the two main suppliers of the Europeans, have moderated their deliveries in recent months for internal reasons,suddenly European stocks are at their lowest on the eve of the cold season.

While we are just emerging from the crisis caused by Covid-19, could this increase in gas and electricity compromise the recovery?

Industrialists are exposed to power outages this winter, Goldman Sachs analysts warn. The rulers fear them that this runaway energy bill feeds inflation and erodes the purchasing power of households. In Spain, where half of households have subscribed to a free-price supply contract, the increase has caused a political crisis; the Prime Minister is stepping up to lower the bill. In Italy, Mario Draghi is also planning an extension to support households. In France, where the price of electricity is controlled, it could increase by 10% in February, that is to say in the midst of the electoral campaign. Hence the increase in the energy check which was announced yesterday by Bercy to help the most modest.

The Polish government accuses the carbon market of having fueled this electricity inflation ...

It is true that the price of carbon has increased and that it is a component of the price of electricity, but its rise is not the determining factor.

However, the confusion between the Climate Plan for Europe and the increase in electricity is a real political risk.

To avoid a reversal of opinion against the energy transition, like the movement of yellow vests in France triggered by an increase in green taxes on fuel three years ago, politicians will have to do education, explain that the transition has a cost and decide who will bear it.

But for the moment, they prefer to insist above all on the positive effects of this transition. 

IN SHORT

► Against all expectations, poverty fell last year in the United States.

As the economy was hit hard by Covid-19, the proportion of American households living below the poverty line fell from 11.8% in 2019 to 9.1% in 2020 according to the figures provided by the administration.

Figures that take into account the effects of redistribution.

It is therefore thanks to the exceptional aid granted to households that poverty has been reduced.

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