electricity prices in France and Germany have increased tenfold in one year

In a crazy week for energy prices in Europe, wholesale electricity prices for 2023 in Germany and France broke new records on Friday, illustrating the risks of shortages threatening Europe and its economy l next winter. French prices blithely exceeded 1,000 euros per megawatt hour (MWh) on Friday, while German electricity traded above 850 euros. A year ago, prices in these two countries were only around 85 euros/MWh. Illustrating the extremely brutal surge this week, French electricity closed at 720 euros last week, and German at 573 euros.

Only 24 of EDF’s 56 nuclear reactors are working

Beyond these two countries, all of Europe is affected. The Czech Prime Minister, whose country holds the presidency of the European Union, announced on Friday that his country would convene an emergency meeting. Several causes are behind the explosion in prices, starting with the drying up of Russian gas flows to Europe since the start of the war in Ukraine: many thermal power stations use gas to generate electricity . As gas becomes more scarce, its price is also at record highs.

In France, only 24 of the 56 EDF nuclear reactors are operating at the moment, in particular due to a corrosion problem, which reduces French electricity production to a historically low level, and mechanically increases prices. For next December specifically, the megawatt hour of French electricity is already trading at more than 1,600 euros, an extraordinarily high level.

End of tariff shields

Although governments want to publicly reassure against any risk of power cuts in societies that have become accustomed to the comfort of continuous electricity, the markets tell a different story, with operators ready to buy electrons more than ten times more expensive than they did a year ago. European states have spent tens of billions of euros this year to protect their citizens from price hikes, but this “shield” is becoming increasingly difficult to finance. The example of the United Kingdom shows it: the regulator announced on Friday that regulated energy prices would increase by 80% from October in the country, and that gas and electricity bills could rise even further ” significantly” in 2023.

In France, President Emmanuel Macron called on Wednesday for “unity” before the end of “abundance”. With the watchword “energy sobriety”, while tens of thousands of customers migrate from private electricity suppliers to the public energy company, EDF, and its fixed rate. Here too, some households will have to pay more for their energy next year, the tariff shield that the French state has been financing since last fall to be replaced in a few months by targeted aid for the poorest.

Energy saving and sobriety plans

The whole of Europe is worried about its supply. Wealthy Switzerland wonders if it will be able to import electricity from Germany or France next winter, as it usually does when its hydroelectric dams are under-rev.

The European Union and the Member States are in the process of setting up energy saving and sobriety plans. It will be necessary to define which industries, which companies will have priority and which will have to reduce or even stop their production. The Brussels plan – which still has to be validated by the States – provides for each of the 27 countries to reduce, between August 2022 and March 2023, its energy consumption by at least 15% compared to the average of the last five years on the same period.