That’s why the whole of Europe is struggling with skyrocketing electricity prices – VG

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It is not only in Norway that electric customers are desperate about skyrocketing electricity bills. In Europe, too, the energy crisis is making itself felt on the portfolio.

Because even though electricity prices have hit record highs here in the north, they are even higher in the south of the continent.

In Europe, the price for a megawatt-hour of electricity is currently around 600 euros, equivalent to 5,700 NOK, estimates Storm Geo’s chief analyst Sigbjørn Seland. This means that a kilowatt hour costs € 0.6, or NOK 5.7.

In southwestern Norway, where electricity is by far the most expensive, on Thursday there will be an average price of NOK 5.41 per kilowatt hour and a maximum price of NOK 6.23.

One kilowatt hour corresponds to the electricity consumption of one kilowatt per hour. A ten-minute shower consumes about 4.5 kWh on average.

read also: How much does electricity cost you?

Two important price factors

Power analysts point to two important reasons for the price gallop in Europe:

* Russia’s war against Ukraine

* Widespread drought on the continent

Russia, which has long been the most important gas supplier in Europe, has drastically reduced supplies to the continent in recent months. Several EU countries, including Poland and Bulgaria, do not receive any gas.

At the latest last week, Russian gas giant Gazprom announced that the Nord Stream 1 pipeline between Russia and Germany will be closed for maintenance for three full days. Immediately, the price of natural gas skyrocketed.

The price of gas again affects electricity prices in Europe, Seland explains in Storm Geo. It is true that the price of electricity is significantly affected by the cost of producing electricity in gas-fired power plants.

– When the price of gas is exceptionally high, as it is now, the cost of producing electricity becomes exceptionally high. This is why Europe has high electricity prices, Seland says.

Facing an uncertain autumn

What will happen to electricity prices in Europe during the autumn and winter is still an open question, according to Marius Holm Rennesund in the consulting firm Thema.

– The uncertainty is enormous, he says.

– The price of gas depends on what Putin chooses to do. If he cuts off gas supplies to Europe completely, we can get even higher gas prices and an even more difficult situation in Europe, which will extend to southern Norway.

Seland a Storm Geo believes electricity prices will continue to rise in the future.

– As it looks now, it’s likely, he says.

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Furthermore, it is not easy to predict as another important factor that contributed to the rise in electricity prices this summer, namely the weather, Rennesund points out.

While Norway is struggling with low water reservoirs, Europe has just left behind an extremely dry and hot summer. This has led, among other things, to France struggling to cool its nuclear power plants, which in turn has increased demand for gas, Rennesund explains. In Germany too, the demand for gas is high and electricity prices are high.

The price of gas hits Norway

According to Rennesund, electricity prices in Europe are expected to be on average higher than electricity prices in Norway during autumn and winter.

However, this does not mean that Norway is not affected by developments in Europe.

– Weather uncertainty is something we have always lived with in a system dominated by hydroelectricity, but the challenge now is that Europe is also facing an energy crisis. It is not as easy to get help from there as before. We can import energy, but then the price in southern Norway has to be higher than what electricity is imported from during times when we need imports, explains Rennesund.

In general, the price of electricity in the European market is fixed hour by hour. Power flows where prices are higher and the need is greatest.

Norway is connected to the European electricity market through several foreign cables. If the price of energy in Norway is lower than the price of energy with our trading partners, some of the energy flows out of Norway. As energy flows where prices are highest, prices in Norway will follow the trend of gas prices in Europe, because gas-fired electricity sets the price of energy for many hours on the continent.

This is not new, Rennesund points out.

– Norwegian and Nordic energy prices have long followed mainland prices. The difference now is that prices in Europe are much higher than before.

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The EU has adopted a crisis plan

Meanwhile, the EU is busy preparing for a difficult autumn and winter. This summer, the European Commission adopted a separate crisis plan in which each member state pledges to reduce gas consumption by 15 percent by March next year, compared to the average consumption of the last five years.

The gas cuts are voluntary, but the plan still allows for the introduction of binding savings targets if the gas shortage becomes acute. The Union also aims to replenish gas stocks to 80% by 1 November.

In parallel, numerous EU countries have taken steps to satisfy frustrated electricity customers.

Among other things, Germany has cut the value added tax on gas, while Spain and Portugal have introduced a maximum price for natural gas used to generate electricity in several power plants in the country. France and Britain also operate with some form of maximum price for electricity, while Sweden and Denmark have chosen to compensate consumers directly.

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