Europe's accelerated transition to green energy has already led to a tenfold increase in electricity tariffs in the wholesale market. By the end of 2022, energy in the EU may become cheaper, the expert believes. But prices will still be three to four times higher than pre-crisis levels.
Moldova again lacks money for gas
At the end of 2021, the Moldovan government signed a new contract with Gazprom on favorable terms for itself - about $430 per thousand cubic meters. However, already at the end of November, the first delay in payments for October and the first half of November in the amount of $74.2 million occurred. On November 26, Chisinau paid the required amount to the monopolist, but already at the beginning of 2022 the situation repeated itself.The Commission for Emergency Situations of Moldova said that the Moldovagaz gas distribution company will ask Gazprom to defer payment for gas until the end of January.
The country's fuel operator lacks about €25 million to pay half of the monthly gas consumption by the 20th.
According to Deputy Prime Minister of Moldova Andrei Spinu, the country is faced with another stage of the energy crisis. In December, the purchase price for gas was around $450 per thousand cubic meters, and in January it reached $646. As the official stressed, in this situation, the growth of electricity tariffs for the country's residents will be inevitable.
The Moldovan energy company Premier Energy, owned by the Czech investment fund Emma Capital, has already demanded a 1.8-fold increase in the electricity tariff from February 1, 2022.
Compared to October 2021, the increase in purchase prices amounted to 96% and 86% respectively - 2.42 lei per 1 kWh in November-December 2021 and 2.29 lei per 1 kWh from January 2022./i
Moldova is far from the only country that has suffered from the energy crisis in Europe.
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France and Germany
The growth of exchange resource prices that began in September last year hit the countries of Northern and Western Europe. Against the backdrop of calm weather and a decrease in the generation of renewable energy sources (RES), the wholesale cost of electricity by the end of December rose by almost four times.In the main EU economy - Germany - the indicators, as of December 21, 2021, increased from €90 to €432 per MWh. Several factors led to this growth at once, including the plans of the German government to close 13 coal mines and three nuclear power plants - Grohnde, Gundremmingen C and Brokdorf. As a result, by the end of 2021, the country immediately lost 6.4 GW of energy capacity.
Fuel was added to the fire by neighboring France, which is one of the most important exporters of "heat" (hereinafter, energy from any source is meant) on the continent. In December last year, two NPP units were closed for unscheduled repairs in the country. In addition, earlier there were failures in the work of the interconnector under the English Channel.
These factors led to a sharp reduction in the supply of electricity to the UK and Germany.
At the same time, in France itself, the wholesale cost of "heat" as of December 21 was almost €443 per MWh, which is almost 10 times higher than the optimal indicators - €40-60.
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Great Britain and Sweden
In turn, the UK has faced massive bankruptcies of energy companies. Since September 2021, 17 firms serving tens of thousands of households have been suspended in the country at once. In early autumn, electricity tariffs in the country almost tripled compared to the beginning of the year.Already, thousands of British families are facing huge increases in bills. According to CNN, the monthly payment in the country for electricity at the beginning of 2022 is about 310 pounds (€372).
The situation is no better in relatively prosperous Sweden. Since the beginning of the crisis, electricity prices in the country have risen from 35 ore to almost 2 crowns (from $0.038 to $0.22 - six times) per kWh. The record growth of tariffs forced the government of the country to provide financial assistance to the needy segments of the population. For this purpose, 6 million crowns (more than $660 million) will be allocated from the budget until the end of winter.
By the beginning of 2022, wholesale electricity prices in the countries of Northern and North-Western Europe have significantly won back the record December rise in prices.
According to the Nord Pool exchange, as of January 12, MWh can be purchased in Germany for €180, in France for €223, in Austria for €196, and in the Netherlands for €189. However, despite the decline in quotations, "heat" in Western Europe is still extremely expensive.
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Eastern Europe and the Baltic States
The strongest consequences of the energy crisis in Europe were felt by the people of Poland and the Baltic countries. In December 2021, electricity and natural gas prices on the Warsaw Mercantile Exchange reached their highest levels in its 20-year history. End consumers faced a threefold increase in tariffs for "heat" compared to pre-crisis indicators.The negative trend in Poland will continue at the beginning of 2022. Thus, the country's Energy Regulatory Authority recently approved new tariffs for individual consumers, raising the monthly price bar by 24% compared to 2021. The state will pay benefits to needy households, their amount will be from 500 to 1.4 thousand zlotys (from €107 to €302).In the Baltic countries, wholesale electricity prices have dropped markedly from their peaks at the end of December, when MWh ranged from €406 to €413. As of January 12, 2022, 1 MWh in Lithuania, Latvia and Estonia cost approximately €153.
Such a sharp decline in quotations became possible largely due to emergency purchases of “heat” from Belarus and Russia, where the export cost of electricity is much lower than in the Scandinavian countries.
What will happen to prices in 2022
Wholesale electricity prices in Europe are likely to decline during this year. The decrease in quotations on average for the year can be almost fourfold - from €440 to €100-120 per MWh. At the same time, the leading EU countries - France and Germany - will not be able to return to pre-crisis indicators (€35-60 per MWh). As a result, the situation on the main stock exchanges of the continent will remain extremely tense over the next 12 months.According to Sergei Kondratyev, senior expert at the Institute of Energy and Finance, there are no prerequisites for a decrease in exchange quotations for gas and oil at the moment. The slowdown in the certification of Nord Stream 2, the launch of which would help the Europeans to fill the fuel deficit, has a negative effect on wholesale electricity prices in the EU.
“Even €100-120 per MWh will still be three to four times higher than the optimal wholesale electricity prices. This situation will become an energy shock for end consumers and industrial enterprises, the growth in the number of bankruptcies of which will continue in 2022,” the expert emphasized.
At the same time, he added, the possible recognition of the "green" status for nuclear and gas generation could greatly help bring down wholesale electricity prices. This will become possible if the cost of quotas for greenhouse gas emissions (CO2) is reduced.
“If in 2020 the tariffs for CO2 emissions in Europe were at the level of about €10 per ton, then by the end of 2021 the bar increased, reaching €60-70. EU gas-fired power plants emit about 450-470 grams per kWh. With a spot gas price of €700-800 per thousand cubic meters, this may lead to an increase in wholesale electricity prices by €10-20 per MWh,” Kondratyev explained.
According to analysts at Citigroup Inc., in 2022, European countries will face the largest electricity bills in a decade. Taking into account the current average wholesale prices, the total spending of the EU countries by the end of December will amount to about $1 trillion.
According to Kondratiev, end-users in Western Europe will be able to bear such high costs only through state subsidies. The poorer states of the Eastern region will have to go to the regulation of electricity tariffs or the introduction of restrictions on the use of "heat". Otherwise, Poland and the Baltic countries will face mass social protests, the expert concluded.
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