Power and gas prices for Britain hit new record highs yesterday as Europe's energy crisis deepened, threatening to push annual household bills to 5,500 next year.
As Russia curtails gas supplies, French nuclear reactors suffer safety shutdowns and droughts threaten electricity supplies from other power plants, wholesale energy prices went up across the Continent and in America.
The increasing wholesale prices will feed into household energy bills, with analysts at Auxilione yesterday increasing their forecasts again: based on Monday s closing prices, bills will hit 4,650 a year in January and 5,456 in April. The energy price cap is currently at 1,971 a year, but it is projected to jump by more than 80 per cent to 3,635 a year from October.
Electricity for the coming winter in Britain is now trading at a price of more than 600 per megawatt-hour, a rise of almost 50 per cent in the past month. Winter power prices are about 12 times higher than average power prices over the last decade and about six times higher than the much-criticised price for the Hinkley Point C nuclear plant in Somerset.
At one stage yesterday, gas prices for the coming winter rose to more than 600 p per therm, almost eight times higher than the price for the same contract a year ago, and a near 30 per cent increase in only a fortnight, said Gemma Berwick, senior consultant at BFY. She said that the products that will deliver in winter and beyond hitting new highs have increased in the last few days, and have increased wholesale prices for gas and power.
Concerns over Russian gas flows, the French nuclear fleet's availability, increasing Asian LNG liquified natural gas demand and now concerns that transportation of fuels may be restricted due to low river levels, are some of the reasons why supply continues to look tight. According to Phil Hewitt, energy expert at EnAppSys, people are worried about French nuclear power and Russian gas. The French government and the EDF say it is not going to be so bad this winter, but energy traders don't think they believe. Because prices are so high, people have to post a lot of collateral, which makes it more expensive and more risky to trade. That means there is less volume in the market, which means prices are more extreme. Europe relied on Russia for about 40 per cent of its gas supplies, but Moscow has curtailed exports in apparent retaliation to Western sanctions since its invasion of Ukraine. The Continent is scrambling to secure cargoes of LNG from elsewhere, which has left the Continent scrambling to secure them. While Britain has received very little gas from Russia in the past, its energy markets are connected to Europe and prices have risen in tandem.
According to Kpler and Bloomberg, a cargo of LNG from Australia was expected to arrive in Britain for the first time in at least six years, as a result of the scramble for supplies.
Lu Ming Pang, an analyst at Rystad Energy, said gas prices had gone up because of the maintenance at the Kollsnes gas processing plant and the Troll field that began over the weekend, reducing Norwegian flows. Meanwhile, the heatwave has caused havoc for power supplies as water levels in the Rhine have fallen so low as to inhibit the transport of coal and diesel to power plants along the river.
In order to make matters worse, warm temperatures have made cooling operations at riverside power stations inefficient. The reduction in water levels has also stopped a number of nuclear power plants from drawing more water from the river for crucial cooling processes.