Europe’s energy ambitions are clear: to shift to a low-carbon future by remaking its power generating and distribution systems. But the present situation is an expensive mess. A global supply crunch for natural gas, bottlenecks for renewable energy and wind speeds in the North Sea among the slowest in 20 years, idling turbines, have contributed to soaring electricity prices. As winter approaches, governments are preparing to intervene if needed in volatile energy markets to keep homes warm and factories running.
1. What’s the problem here?
Energy prices skyrocketed as economies emerge from the pandemic — boosting demand just as supplies are falling short. Coal plants have been shuttered, gas stockpiles are low and the continent’s increasing reliance on renewable sources of energy is exposing its vulnerability. Even with mild weather in September, gas and electricity prices were breaking records across the continent and in the U.K. Italy’s Ecological Transition Minister Roberto Cingolani said he expected power prices to increase by 40% in the third quarter. In the U.K., CF Industries Holdings Inc., a major fertilizer producer, shut two plants, and Norwegian ammonia manufacturer Yara International ASA curbed its European production because of high fuel costs, as the crunch started to hit industrial companies.
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