German Power Prices Hit Record As Energy Crisis Worsens

German power prices surged above 500 euros per megawatt-hour on the European Energy Exchange AG for the first time as the energy crisis worsened.

German year-ahead power jumped 6% to 507 euros per megawatt-hour as there are no signs of the natural gas rally slowing down. 

Russia’s reduction of NatGas flows via the Nord Stream 1 pipeline and a scorching summer across Europe have been the main drivers of power prices. Since early June, power prices have risen 173%, pressuring households and businesses with unprecedented costs. 

“The longer these price rises go up, the more this will be felt across the economy,” said Daniel Kral, senior economist at consultant Oxford Economics. “The magnitude of the increase and magnitude of the crisis isn’t comparable to anything in the past few decades.” 

Meanwhile, Europe’s benchmark NatGas prices are at the highest intraday price since early March. 

“Governments are under pressure to plan for possible blackouts this winter in some European countries. Output from France’s nuclear fleet, traditionally the backbone of the region’s power system, remains on course to be the lowest in decades, while hydropower stocks in some countries are also at multi-year lows,” Bloomberg said. 

The standoff continues between Germany and Russia over Nord Stream’s turbine stuck in transit after repair work was conducted in Canada. Russia cut the pipeline’s capacity to just 20% last month, citing technical problems.

Germany’s Economic Minster Robert Habeck warned Monday that Russia was weaponizing the pipeline as an “excuse” to reduce supplies to Europe ahead of winter. 

Germany wants to fast-track its path away from Russian NatGas though it may find it very hard because it’s used in everything from power plants to factories. It will be a tricky balancing act for the Germans to reduce Russian NatGas supplies as it would only mean higher power prices and heating costs due to tight supplies, which may force industrial shutdowns this winter and some households to resort to using firewood to heat their homes.