Europe hit an all-time electricity price record.
The average monthly price of electricity in Europe in August 2022 was the highest in history due to a sharp increase in gas prices, according to a study by the analyst company Rystad Energy.
“Electricity prices in Europe have risen even further in the last week and it can now be argued that August is the most expensive month for electricity in all major European markets,” said the company’s analyst Fabian Renningen.
According to data from Rystad, the July record was broken in Italy, France, Germany and Great Britain, with the Italian market being the first where the monthly average spot price exceeded 500 euros per megawatt hour. In addition, the wholesale price of electricity with delivery for next year in France and Germany exceeded 1,000 euros per MWh last week.
This surge in electricity prices is linked to the sharp increase in gas prices in recent days. This situation led to active action by the European Commission. The head of the EC, Ursula von der Leyen, said that the EC considers it necessary to make sure that gas prices do not have a dominant influence on the price of electricity in the EU market.
“The European Commission has made it clear that it plans to intervene in the electricity market to curb skyrocketing prices. One of the key issues that needs to be addressed is the separation of the gas and electricity market, which is not clearly how this can be done most effectively in a liberalized electricity market such as the European one,” Renningen said.
One option, the analyst says, is to impose a price cap, but the problem in this case is how electricity producers will be compensated for their costs when the price cap is lower than the production costs of coal and gas. “If gas or electricity prices are capped, some of the important market mechanisms for balancing supply and demand will be disrupted,” he added.