Between drought and gas shortage, the EU is in the midst of an energy crisis


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A passenger boat aground on the Rhine in Bonn, Germany – Benjamin Westhoff – Reuters

The drought makes the European energy crisis even more dramatic. For some time due to the lack of water the hydroelectric power plants they work by service. In Italy the production of the approximately 4,500 hydroelectric plants, according to the latest data from Terna, fell by 40% in the first half of 2022: if last year between January and June the hydroelectric plants had produced 24 thousand GWh of electricity, this production fell to minus 16 thousand per year.

In normal times hydropower covers about 15% of electricity production in Italy, but this year it has dropped to just over 9%. It’s a bad year for hydropower across Europe, but the negative consequences of drought don’t stop there, because water is also essential for other power generation technologies.

In France, the water crisis is holding back the production of nuclear power plants, which use the water flows of rivers for cooling. Usually in summer France limits the production of power plants, because the water they pour into the rivers is hot: it raises temperatures and alters river ecosystems. With the emergency this year, however, the government has asked the Nuclear Safety Authority to allow five plants to produce as much electricity as possible. Even at the cost of raising the temperature of the waters of the Rhone, already very high for this very hot summer. “The government believes it is a public necessity to maintain production from these five plants until 11 September, despite exceptional weather conditions,” ASN explained.

Germany is the one most in difficulty. Europe’s leading economy is trying to fill the natural gas shortage with increased electricity generation from coal-fired power plants. But even here the drought is complicating Berlin’s plans. The waters of the Reno, the most important river in Europe, are at their lowest levels in the last fifteen years. At the Kaub junction, they dropped to under 40 centimeters, the minimum limit for navigability. And the Rhine is the privileged channel for transporting coal, loaded onto barges to supply power plants. The companies are arranging to find alternative solutions: they increase transport by train and by truck, but it is a fallback that is not enough. The association of German utilities announced last week that the production of energy from coal will be limited until September: at this time, Germany is able to use only about 65% of coal supplies.

Workers at work to build the first German floating regasification terminal in Wilhelmshaven

Workers at work to build the first German floating regasification terminal in Wilhelmshaven – Fabian Bimmer – Reuters

It is in this context that gas price quotations continue to run towards unprecedented records. The price of the TTF, the controversial Dutch gas market which is the benchmark for European prices, has risen by another 10%, breaking through € 240 per MWh. It is not only about 10 times the price of a year ago, but it is also almost triple the already very high prices at the beginning of June. On a threatening note, Gazprom predicted that gas prices in Europe could rise by 60% in the winter and rise above $ 4 per cubic meter from the current $ 2.5. A “cautious” estimate warns from Moscow.

Containing the effects of these increases on households and businesses is increasingly difficult for governments. Also in Germany, the gas authority announced on August 15th an increase in prices from € 2,419 per kWh, for a 13% increase in tariffs which will translate into an annual expenditure of € 480 more per family. The increase will remain in effect until April 2024 and will help Uniper (the leading Russian gas importer, for which the government has already allocated around 8 billion euros) and other distribution companies to stay on their feet.

In Italy theRegulatory Authority for Energy, Networks and the Environment (Arera) warned Parliament and the government in the July 29 report that bill prices could double in the quarter October-December. A scenario that the Arera does not hesitate to define as “dramatic”. As a reaction, the Authority changed the way in which the bills: on the one hand, the update will be monthly, no longer quarterly, on the other the prices will be disconnected from the Dutch TTF and will instead refer to the quotation of the day before on the PSV, the Italian virtual trading point. An intervention that should help to find the necessary natural gas by reducing the difference between the current price and the expected price and would also help to quickly transfer any new (and probably inevitable) aid financed with public funds to family businesses.

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About Eric Wilson

The variety offered by video games never ceases to amaze him. He loves OutRun's drifting as well as the contemplative walks of Dear Esther. Immersing himself in other worlds is an incomparable feeling for him: he understood it by playing for the first time in Shenmue.

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