Analysts: the cost of electricity in Europe in August was the highest

MOSCOW, August 31 – PRIME. The average monthly electricity price in Europe in August 2022 became the highest on record due to a sharp increase in gas prices, follows from a review by the analytical company Rystad Energy.

“European electricity prices have risen even more over the last week, and it can now be argued that August will be the most expensive month for electricity in all major European markets,” said company analyst Fabian Renningen.

According to Rystad, the July record was broken in Italy, France, Germany and the UK, with the Italian market being the first where the average monthly spot price exceeded EUR 500 per MWh. Moreover, according to the agency, the wholesale price of electricity for next year’s delivery in France and Germany exceeded 1,000 euros per MWh last week.

It is noted that such a jump in electricity prices is associated with a strong increase in gas prices in recent days. This situation has led to active actions on the part of the European Commission. The head of the EC, Ursula von der Leyen, said that the EC considers it necessary to ensure 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, and it is not clear how this can be done most effectively in a liberalized electricity market such as like a European one,” says Renningen.

One option, the analyst said, would be to set a price cap, but the problem then is how electricity producers will be reimbursed for their costs in cases where the price cap is lower than the costs of coal and gas production. “If gas or electricity prices are capped, some of the important market mechanisms for balancing supply and demand will be disrupted,” he said.