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Energy Crunch in Europe With New Record Prices and Wind Stops Blowing

There's more than a bit of a problem in Europe, especially the UK where wind is suddenly unreliable.
Not Enough Wind

Europe's Energy Crunch Deepens

“If it’s a cold winter, there’s not enough supply” says Amos Hochstein, the U.S. State Department’s envoy for energy security.

And as the energy crunch deepens the U.S. Warns Europe Isn’t Doing Enough.

With about a month to go before the start of the heating season, Europe doesn’t have enough natural gas in storage sites and isn’t building inventories fast enough either. Amos Hochstein, the U.S. State Department’s envoy for energy security, said on Friday he was worried about supplies this winter.

Gas stockpiles in Europe are already at the lowest level in more than a decade for this time of year, pushing up the cost of producing electricity. The rally in European energy prices is just a taste of what’s to come for other commodities, Goldman Sachs Group Inc. said in a report.

“European energy pricing dynamics offer a glimpse of what is in store for other commodity markets, with widening deficits and depleting inventories leading to elevated price volatility,” said Goldman analysts including Jeff Currie. For European gas, “demand destruction is the only option to rebalance markets,” they said.

Wind Stops Blowing and Prices Soar

Wholesale Day-ahead power prices

The Wall Street Journal reports Energy Prices in Europe Hit Records After Wind Stops Blowing

Natural gas and electricity markets were already surging in Europe when a fresh catalyst emerged: The wind in the stormy North Sea stopped blowing.

The episode underscored the precarious state the region’s energy markets face heading into the long European winter. The electricity price shock was most acute in the U.K., which has leaned on wind farms to eradicate net carbon emissions by 2050. Prices for carbon credits, which electricity producers need to burn fossil fuels, are at records, too.

It took a lot of people by surprise,” said Stefan Konstantinov, senior energy economist at data firm ICIS, of the leap in power prices. “If this were to happen in winter when we’ve got significantly higher demand, then that presents a real issue for system stability.

At their peak, U.K. electricity prices had more than doubled in September and were almost seven times as high as at the same point in 2020. Power markets also jumped in France, the Netherlands and Germany.

Prices for power to be dispatched the next day rocketed to £285 a megawatt hour in the U.K. when wind speeds dropped last week, according to ICIS. That is equivalent to $395 a megawatt hour and marked a record on figures going back to 1999.

After the wind dropped this month, National Grid asked Électricité de France SA to restart its West Burton A coal power station in Nottinghamshire. That won’t be possible in the future: The government has said all coal plants must close by late 2024.


Praying for a Warm Winter and NG From Russia

The irony of this setup is astounding. 

The US is moaning Europe isn't doing enough when it seems like they have done too much. 

Now Europe is praying for a warm winter and more natural gas production from Russia. 

Meanwhile, the price of power is up sevenfold in the UK. 

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