Soaring fossil gas costs responsible for EU electricity price increase
Fossil gas is to blame for soaring electricity prices around Europe, not EU climate policy
About
Ember analysis shows that fossil gas is to blame for soaring electricity prices around Europe, not EU climate policy. We provide an overview of the EU, alongside deep dives on Italy, the Netherlands and Spain.
Executive summary
Fossil gas drives spiking European electricity prices
Various environmental, geopolitical and economic forces combined has meant that fossil gas prices have skyrocketed across Europe. This spike has pushed up EU electricity prices, as the cost of generating electricity from fossil gas tripled from January to reach €150/MWh in September. Meanwhile carbon costs only saw a relatively modest increase.
The worst affected EU countries were those that rely on fossil gas for a significant amount of their electricity. This includes the Netherlands, Italy and Spain:
- Netherlands: Wholesale electricity prices more than tripled in the last year, as gas prices more than quadrupled since January
- Italy: Wholesale electricity prices almost tripled, as gas prices more than quadrupled since January
- Spain: Wholesale electricity prices quadrupled, as fossil gas prices spiked by over 340% since January.
Electricity prices soar in Europe
Fossil gas costs, not EU climate policy, is behind the electricity price increase in Europe
Which countries have been most affected?
EU countries that rely on fossil gas were the hardest hit
Conclusion
The way out of gas price volatility
The way to avoid the volatility of fossil gas is to accelerate the transition to clean electricity, in particular wind and solar, so that the power price is set by gas for fewer hours. Wind and solar are not exposed to variable fuel prices and the cost of generating electricity from these sources has collapsed in recent years.
The European Commission’s toolbox for tackling the rising energy prices supports our analysis. It estimates that the effect of the fossil gas price increase on the electricity prices is nine times larger than the impact of the carbon price rise and concludes that the EU needs to boost its energy independence through investment in renewables, energy efficiency and energy storage.
These fuel price shocks send out a stark warning to those countries – like Poland – that actually intend to increase their reliance on imported fossil gas over the next decade rather than invest in domestic renewable alternatives.
