EU, German Leaders Vow To Temper Soaring Electricity Prices

The head of the European Union’s executive branch and Germany’s chancellor Olaf Scholz on Monday pledged reform of the continent’s electricity market to help bring down power prices that have been pushed higher by skyrocketing gas prices, the Associated Press (AP) reported.

Photo Insert: German power prices for next year, which are considered Europe's benchmark, briefly jumped above €1,000 ($999.80) per megawatt hour on Monday before falling back to €840 ($839.69) per megawatt hour.

European Commission President Ursula von der Leyen said in a speech in Bled, Slovenia, that soaring electricity prices “are now exposing the limitations of our current electricity market design.”

She added: “It was developed for different circumstances. That is why we are now working on an emergency intervention and a structural reform of the electricity market.”

The continent’s electricity market is underpinned by a “merit order” system in which the power stations offering the cheapest electricity are tapped first, but prices are determined by the last and most expensive power stations to be tapped — at present, those using gas, whose price has risen sharply following cuts in supplies by Russia to several European countries amid the war in Ukraine.

In London, Julia Horowitz reported for CNN Business on Aug. 30, 2022 that electricity prices in Europe continue to smash records, intensifying the region's energy crisis and fanning fears about access to electricity and heating as the weather begins to cool.

German power prices for next year, which are considered Europe's benchmark, briefly jumped above €1,000 ($999.80) per megawatt hour on Monday before falling back to €840 ($839.69) per megawatt hour.

"This is not normal at all. It's incredibly volatile," said Fabian Rønningen, a senior analyst at Rystad Energy. "These prices are reaching levels now that we thought we would never see."

Prices have jumped since Russia's Gazprom announced that it would shut down the Nord Stream 1 gas pipeline for three days starting Wednesday to perform maintenance work, reigniting fears that Moscow could completely shut off gas to Europe, which is racing to stockpile supplies ahead of the winter.

When the crucial pipeline went offline for repairs for 10 days in July, many policymakers feared it wouldn't come back. When Russia did restart operations, flows were significantly reduced.

France's nuclear sector, which provides about 70% of the country's electricity, is also struggling with lower output, pushing up the country's energy prices.

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