German power prices for next year, considered Europe’s benchmark, briefly jumped above €1,000 ($999.80) per megawatt hour on Monday before falling back to €840 ($839.69) per megawatt hour.
“This is not normal at all. It is incredibly volatile,” said Fabian Rønningen, senior analyst at Rystad Energy. “These prices are reaching levels now that we thought we would never see.”
Prices have risen since Russia’s Gazprom announced it would shut down the Nord Stream 1 gas pipeline for three days starting Wednesday to carry out maintenance work, sparking fears that Moscow could completely cut off gas to Europe, which is scrambling to stockpile supplies ahead of winter .
When the crucial pipeline went offline for repairs for 10 days in July, many politicians feared it would not return. When Russia restarted its operations, flows were significantly reduced.
France’s nuclear sector, which supplies around 70% of the country’s electricity, is also struggling with lower output, pushing up the country’s energy prices.
The Czech Republic announced on Monday that it will convene an emergency meeting of Europe’s energy ministers in Brussels next week as the region hunts for solutions.
Businesses are concerned that they will periodically have to stop operations over the winter if there is a lack of electricity, while households may struggle to pay sky-high heating bills. The fallout could trigger a deep recession.
There was reason for optimism on Monday. German Economy Minister Robert Habeck said the country’s gas reserves were filling up and the country did not need to pay the high prices the market was currently commanding.
Germany’s gas reserves are almost 83% full and will reach the 85% threshold in early September, according to Habeck.
But great uncertainty remains. High power prices for next year indicate that traders do not think the crisis will last for the next few months, according to Rønningen.
– It may very well be that we will have a number of winters where we have to find solutions in one way or another, Shell CEO Ben van Beurden said at a press conference in Norway on Monday.
Uniper, Germany’s biggest importer of natural gas, said on Monday it would need more help from the government, asking for an additional 4 billion euros ($4 billion). The company said it is cash-strapped because of the shortfall in Russian exports, forcing it to pay sky-high market prices to fill gaps in supply.
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