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by Irina Slav
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Poorer German families may need to choose which rooms of their flats to heat this winter because of sky-high electricity prices, The Independent reported this week, citing an official from a children’s charity. Electricity prices in the country are about 30% higher than they were at the start of the year. The government even had to slash renewable energy taxes to help people cope with their bills.
Electricity bills for Italian households and businesses could climb by 25% from next month without government intervention, The Local Italy reported also this week, adding that gas bills could soar by 50%, and that’s after household and business bills for electricity were hiked by 28.9% in October. It could have been worse, with the hike at 45% if the government hadn’t provided 3 billion euro to cushion the blow.
Spain, meanwhile, is extending tax cuts on electricity bills until May next year in a bid to help households cope with higher power prices, Reuters reported last week. The tax cut, by almost half to 10% from 21% was first made in June, when gas prices were far lower than they are now.
France, whose government is facing elections in April, may see a spread-out electricity tariff hike to avoid the shock of having it imposed all in one go with people already struggling to pay their electricity bills, according to Bloomberg. That’s a bit like developing short-sightedness and being advised to go to the eye doctor twice a year instead of once, in order to not get shocked by how much your sight has worsened over 12 months. That’s a true story, by the way, and actual advice from an ophthalmologist. But moving on.
Greece is offering financial help to households and businesses struggling with high energy bills, according to a Reuters report from this week. Measures so far have included subsidies for electricity bills, in effect since September, and direct help for poor families in order to help them afford fuel oil for heating.
In the UK, households could see electricity bills rise by more than 50% next year, according to a forecast by Investec, cited by the Financial Times. In the meantime, utilities are sinking in droves because of the gas price spike and, according to The Guardian, consumers may be facing a bill of 3.2 billion pounds to cover the costs associated with the busts.
In Bulgaria, the new government voted to impose a moratorium on electricity prices to “have time to analyse the situation”, according to the PM. Critics have been quick to warn that a moratorium only delays the inevitable, which in this case will be a substantial hike in electricity prices for both businesses and consumers.
Meet the new energy poor — those millions of households in wealthy (and not so wealthy) Europe that perhaps for the first time in their lives need to sacrifice a comfort they have taken for granted and choose which rooms to heat. For some of us, it’s a rerun of a film we’ve already watched.
I remember when twenty years ago my husband and I were at the start of our working lives and money wasn’t exactly plentiful. We had a local electric heating system in our flat but after one winter of paying horrifying bills while freezing we gave up. We bought a gas heater. True, it only heated the room it was in and it needed frequent ventilation, which meant opening the balcony door and letting cold air in, but it heated this room well. And also gas was about ten times cheaper than the electric heating system.
Right now, millions of working Europeans are facing a similar situation only they probably can’t buy a gas heater because one, gas is too expensive and two, the majority of Europe, according to the European Commission, is already using natural gas boilers for heating purposes.
They could have switched to electric heaters, perhaps, but electricity prices are breaking records in time with gas prices and I’m sure this has zero to do with the fact that wind power generation across Europe’s renewable heaven is close to zero in the unluckiest countries and below 10% of total national output in the luckiest. Weather is a fickle mistress and a cruel master. Unfortunately, this is only the beginning.
S&P Platts last month published a report that, to me, reads like a horror story. Germany’s new government, the report said, plans to add at least 100 TWh of renewable generation capacity every year until 2030, aiming to boost the share of renewable energy in the national mix to as much as 80%.
Today, December 21, wind power accounted for 3.75% of the electricity available in Germany. The utilisation rate of the country’s wind power capacity stood at 3.63%. Someone on Twitter the other day calculated how much spare renewable capacity the U.S. would need in order to have reliable energy from wind and solar. It was quite a large figure; larger, in fact, than planned operating capacity. I wouldn’t risk such a calculation for Germany based on planned and actual capacity figures but I would dare predict that it would need a lot of spare capacity on top of those 100 TWh annually.
“Blackouts are extreme and very rare events in Europe,” said a spokesperson for the EU electric grid operators’ association, Entso-E, in November, as quoted by Politico. The article then went on to quote the spokesperson as adding that the European grid has not seen a major outage in two decades. Further, the spokesperson said that national grids are now better connected, facilitating flows of gas and electricity.
This sounds very encouraging until you remember that France had to shut down several nuclear reactors because of signs of corrosion; that Russia reduced flows on the Yamal-Europe pipeline, which accounts for just a tenth of Russian flows into Europe but we all live in fear now and a tenth of capacity is enough to freak everyone out even though Gazprom is supplying all contracted volumes; that winter is just beginning and storage is still low for the season; and that coal supply is tight and prices are high because, well, energy transition and carbon prices.
However well connected European electricity networks are, it is highly doubtful Poland alone would be able to supply its coal-generated electricity to every European country gasping for it under the weight of seasonally low temperatures, unavailable LNG and lower Russian supplies because, guess what, it’s cold in Russia, too and Moscow is kind of selfish about first securing its own energy needs.
But here’s the twist: there is gas in Europe and for Europe, even if inventories are lower than usual. They’re not close to zero, yet. But there is also wild speculation, enabled by liberalised energy markets strongly encouraged by Brussels. Just how big a role speculation has in the Great European Energy Crisis of 2021 remains to be seen when the dust settles. Suffice to say the news about the Yamal pipeline immediately led to a jump in prices.
The questions I would like to seen answered by those in authority as soon as possible are:
How long could the energy subsidies continue given that state funds are already stretched thin, what with soaring inflation, new pandemic restrictions (already implemented or on the way because it’s such fun to live in fear), and grand wind and solar capacity plans amid rising commodity prices?
What happens when the money runs out, because no government can support its energy poor for half of every year, which is roughly how long heating season continues in the temperature European climate? What sort of government intervention could we expect instead?
Yet instead of answering these questions, those in authority are only planning to create more energy poor: last month, Euractiv reported that a “social climate fund” proposed by the European Commission to help the poorer members of the big EU family to handle better the “challenges” of the energy transition has been criticised for failing to do what it aims to do.
According to the critics, from the Jacques Delors think-tank, the expansion of the EU emissions trading scheme to cars and buildings risked hurting Europeans disproportionately compared to benefits gained in the emissions department. However, based on what has been happening in Europe so far this year in energy, chances are such criticism will be brushed off and life will get a little — or a lot —more expensive for a lot of people who can’t afford it.
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