FILE PHOTO: European Union flags fly outside the European Commission headquarters in Brussels, Belgium, March 1, 2023.REUTERS/Johanna Geron//File Photo
Brussels: Electricity costs in Europe are forecast to increase by as much as 27% next summer on the back of rising gas prices and lower nuclear and hydro power production.
Higher carbon contracts will also help make fossil-fuel generation more expensive in 2025, according to analysts.
Any increase in solar generation likely will be offset by a drop in hydro generation and the closings of some nuclear plants, said Sabrina Kernbichler, lead power analyst at Energy Aspects Ltd.
“This leaves Europe to fill a similar fossil-fuel gap in summer 2025 compared with summer 2024, but at higher marginal costs,” she said.
Energy Aspects forecasts German prices will average 93.80 or about US$99.18 per megawatt-hour in July 2025.
That’s 20 more than last summer.
More expensive power during summer months, when solar generation is high, exposes the risks of Europe’s continued reliance on gas.
Energy Aspects sees year-on-year gas prices increasing 33% next summer and carbon contracts increasing 13% – pushing up the costs of running gas-fired power plants.
For example, the marginal costs of a 55%-efficient gas-fired unit in Germany will increase by about 24 per megawatt-hour year-on-year, Kernbichler said in an email.
Although solar generation should set records again, the shutdown of nuclear plants in Belgium will be a counterweight.
This is a risk to Europe’s cheap energy supply, especially with the backdrop of lower hydro output for next year, said Daniel Muir, an analyst at S&P Global Commodity Insights.
“The quickly deteriorating hydro situation in central and south-east Europe could cause some regional concern,” Muir said.
Swiss hydro stocks are at low levels not seen since winter 2021, which preceded a summer of extreme drought.
“In a hypothetical, where gas and power prices remain as elevated as current levels, the impact particularly on industrial consumers is exacerbated further,” Muir said. — Bloomberg
