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

editor: REMIX NEWS
author: John Cody
Soaring electricity prices have fanned the flames of European inflation. (AP Photo/Frank Augstein)

Electricity prices in Europe have climbed to another record high, sparking fears that the continent’s ongoing energy crisis may only worsen. According to analysts, rising electricity prices are primarily the result of soaring natural gas prices.

The price of the key electricity futures contract in Germany increased by more than 3 percent to €475 per megawatt-hour (MWh) on Monday on the European Energy Exchange (EEX). Prices have roughly doubled in the past two months and are nearly six times higher than a year ago.

Due to limited gas supplies, there is concern whether Europe will manage to generate enough electricity in the winter, according to Czech news outlet Echo24. Russia has drastically reduced gas flows to Europe, which are currently 20 percent lower than average following the European Union’s decision to adopt a series of anti-Russian sanctions in retaliation for the invasion of Ukraine.

According to analysts from the Danish power company Energi Danmark, there are no clear signs yet that the rise in electricity prices will slow any time soon.

‘We expect further price growth this week’

The price of the key gas futures contract for the European market in the Title Transfer Facility (TTF) virtual trading hub gained roughly 4 percent on Monday at noon and reached above €214 per MWh. A year ago, it was below €30 per MWh.

“Electricity prices in Germany have gone off the chain. Very expensive electricity for households will be a matter for many years in the Czech Republic as well. One cost-saving tariff will not be enough,” added Lukáš Kovanda, chief economist of Trinity Bank. Environmentalists are trying to “blame Putin for super-expensive electricity,” but this is their failure, says the economist.

According to Kovanda, Petr Fiala’s government lives under the illusion that expensive electricity will only last one or two heating seasons for Czechs.

“But it can be high for maybe five years, just like gas. People suspect this and ask for systemic solutions such as the partitioning of ČEZ,” Kovanda pointed out. ČEZ is the largest electricity producer in Czechia.

The rise in energy prices has pushed up inflation in European countries and increased the costs for households and businesses. European governments are working on measures to mitigate the effects of expensive energy, but some officials are already warning of potential social unrest and even violence as inflation continues to burden citizens.

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