The price of a crucial electricity futures contract on the European Energy Exchange in Leipzig exceeded €500 per megawatt-hour (MWh) for the first time on Tuesday as the energy crisis continues to envelop Europe.
Over the past year, the price of electricity has increased by roughly 500 percent, mainly driven up by restrictions on Russian gas supplies, according to Czech news outlet Ceskenoviny.
Prices on the Leipzig stock exchange are crucial for Europe. The price of the key contract with delivery next year rose by 11 percent on Tuesday afternoon and climbed up to €530.5 per MWh. Analysts do not expect that the pressure on price growth will ease in the near future.
Electricity prices reach record high in Europe, experts warn it could be the new normal
“Very expensive electricity for households will be a matter for many years in the Czech Republic,” says economist Lukáš Kovanda
The rise in energy prices pushes up inflation in European countries and increases the costs of households and businesses.
“The longer these prices continue to rise, the more the whole economy will feel it,” said one of the analysts at Oxford Economics. “We cannot compare the scale of this growth and of this crisis to anything in recent decades,” he added.
Gas prices in Europe climbed to their highest level since March on Tuesday. The price of the key gas futures contract for the European market in the Title Transfer Facility virtual trading hub showed a roughly 5 percent increase in the early evening and hovered above €230 per MWh. During the day, it rose above €250 per MWh, while a year ago it was below €30 per MWh.
“The seemingly unstoppable rise in European natural gas prices continued,” analysts at Deutsche Bank Research said. “Europe’s latest heat wave is driving the prices. It is causing rivers to dry up and fuel transport problems, deepening the existing energy woes.”
The situation around Russian gas supplies to Europe became complicated when Russia launched an attack on Ukraine in February, and the European Union adopted a series of anti-Russian sanctions in retaliation. Due to limited gas supplies, there is a concern in the market about whether Europe will manage to generate enough electricity in winter. Russian state gas company Gazprom warned on Tuesday that gas prices in Europe could rise by another 60 percent this winter.