A global surge in wholesale power and gas prices means households across Europe face much higher energy bills this year and beyond, with the region's most vulnerable exposed to fuel poverty, consumer groups say.
Why The High Prices?
Energy companies pay a wholesale price to buy the gas and electricity they sell to consumers. As in any market, this can go up or down, driven by supply and demand.
Typically, prices rise in response to higher demand for heating and lighting in winter, and fall in summer.
Prices started to rise above historically normal levels last September and have soared further following supply disruption linked to Russia's invasion of Ukraine that began on Feb. 24.
WHY IS EUROPE RELUCTANT TO BAN RUSSIAN ENERGY IMPORTS DURING THE WAR IN UKRAINE?
Just before the war started, the German government halted the Nord Stream 2 pipeline that would have doubled the amount of Russian gas shipped to Europe and Russia in July reduced volumes pumped through Nord Stream 1 to 20% of capacity, citing maintenance issues.
The German government said this is a pretext used by Moscow to hit back against Western sanctions imposed over the Ukraine war.
French nuclear outages and a heatwave across Europe this summer have also boosted demand.
Benchmark European gas prices at the Dutch TTF hub have risen by nearly 350% year on year, while German and French front-year power contracts have leapt by 540% and 790% respectively.
How Long Could This Last?
Many gas market analysts expect prices to remain elevated for the next two years or more.
Global competition for gas and coal this winter is expected to prevent prices from falling. Any more disruption to Russian gas supply, such as a full stoppage through Nord Stream 1, would support prices.
Although European countries are on track to refill gas storage sites to a minimum level of 80% by Oct. 1, an extra cold winter could deplete those reserves quickly.