Electricity, why are the prices soaring? And what does French nuclear power have to do with it (besides air conditioners)?


Electricity, why are the prices soaring?  And what does French nuclear power have to do with it (besides air conditioners)?
Written by aquitodovale

Warm temperature record, coinciding with the peak of energy prices: the perfect storm. The grip of the heat that traps Europe from West to East and which is hitting Italy with the peaks expected over the weekend due to the African anticyclone could not have come at a worse time. This morning (July 19) at 4,554 meters of the Capanna Margherita, on Monte Rosa, at 8:30 it was already + 1.9 and at 6:00 pm yesterday the column touched 3 degrees. From the record 40 degrees in the United Kingdom, even in Italy we could establish new peaks in cities like Milan. Yesterday the usual price of the spot electricity price on the Gme stock exchange was touched: almost, July 18, 500 euros per megawatt hour, while today’s price (July 19) for electricity delivered tomorrow is expected to be 540 euros.

Electricity, record prices in Italy and Germany

The consumption of electricity to run the air conditioners comes to terms with electricity prices, which although they follow very complex and different dynamics from country to country (in Italy the government has removed the system charges from the bills, Germany has removed them only companies, Spain has recently been able to put a ceiling on the price of gas), are on the rise everywhere. The figure that can be used to make a comparison between the different countries is the price reached by the electricity exchanges. Yesterday the GME stock market peaked at almost over 495 euros per megawatt hour. Another country where electricity at record levels is Germany (397 euros per MWh on the stock exchange yesterday), while also France – which historically has lower prices because it has a lot of national nuclear production – reached a maximum of over 521 euros megawatt hour. The Stock Exchange which is the main indicator of the production costs of our electricity system – comments Davide Tabarelli, president and founder, Nomisma Energia – yesterday (July 18, ed) quoted ten times the average prices of the last five years. The market, to put it like when playing cards, went awry.

The cost in Europe

These are the peaks recorded on the stock exchange, while if we look at longer periods of time according to the Arera authority which is based on Eurostat data, the country where electricity costs the most in Europe is Germany, followed by Italy. The cost of electricity in Europe is mainly influenced by the price of raw materials, taxes and costs for transport and marketing, but each European state then applies a different taxation. According to Eurostat data for 2021, the average European cost of kWh has a value of 0.219 euros for domestic customers, with the highest tariffs in Germany (0.3193 euros / kWh) where the costs for transport, marketing and the tax charges are high. In Italy the cost was € 0.2259, above the average of € 0.2203, while in Spain it was 0.2323. According to the British research institute Rystad Energy, on the other hand, Italy is the European country where, on average, from October 2021 to today, electricity is paid the most.

The gas crisis

The situation changed in 2022, when prices went up even more and this for two reasons. The first is the boom in gas prices, which have already risen since mid-2021 and which have shot up after the invasion of Ukraine and nothing suggests that they will fall. Indeed, with the reduction of natural gas supplies from Russia, they could rise further. According to the European budget commissioner Johannes Hahn, Moscow will not reopen Nord Stream 1, one of the gas pipelines through which Siberian methane reaches Europe and above all serves Germany. We are working on the assumption that it will not return to operation, he said, on the sidelines of a meeting in Singapore. The pipeline was closed a week ago for maintenance work which is expected to last ten days, with the reopening scheduled for 21 July. The closure has fueled fears in Europe that the Kremlin may cut off supplies in retaliation for sanctions against the invasion of Ukraine tomorrow, July 20, the European Commission will present the emergency plan in the event of a total stop of Russian supplies.

Tabarelli: the nuclear issue in France

But there is another crisis that is less talked about and that of nuclear power in France. Here almost half of the 56 power stations are stopped for maintenance. Almost half of the power plants are old and are now out of use because they are undergoing maintenance or repair – explains Tabarelli – while Paris has very strict environmental protection rules and it must be considered that French nuclear power is the hard core of the European system with 25% of production in Europe. France today is already buying electricity at very high prices from Spain and the United Kingdom. According to French legislation, nuclear production must be reduced or even stopped when river temperatures exceed certain limits to ensure that water, after being used to cool power plants, does not damage the environment when it is returned to rivers. Furthermore, according to Bloomberg, Edf may be forced to reduce the production of some of its French nuclear reactors during the summer due to the drought which has reduced the amount of river water available for cooling.

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