"Shortage of Water to Cool Nuclear Plants, Electricity Prices Quintuple in a Year"…Europe Faces Worst Drought Amid War

[Image source=Yonhap News]

[Asia Economy Reporter Park Byung-hee] Bloomberg reported on the 15th (local time) that European electricity prices soared to an all-time high due to the overlap of gas supply shortages and heatwaves.

According to recent data from the European Energy Exchange, the German electricity futures price for delivery next year rose by up to 6.6%, reaching an all-time high of 455 euros per megawatt-hour (MWh). Current electricity prices have increased more than fivefold compared to the same time last year.

French electricity futures prices surpassed 600 euros per MWh for the first time ever. The French electricity futures price for delivery next year rose by up to 7.8%, reaching 622 euros per MWh. Bloomberg explained that this is equivalent to paying 1,100 dollars per barrel of crude oil. A year ago, French electricity futures prices were below 100 euros per MWh.

In Europe, a large portion of electricity is generated from gas, but Russia has significantly reduced gas supplies, causing a severe gas shortage in Europe. This year, an extreme heatwave has hit Europe, causing electricity demand to surge.

French Electricity Futures Price Trends [Image Source= Bloomberg]

In France, where nuclear power accounts for a high proportion of electricity generation, a shortage of water to cool nuclear reactors is disrupting power production. Currently, more than half of France's nuclear reactors are offline due to maintenance. France usually exports surplus electricity, but this year, due to the severe power shortage, imports have exceeded exports so far.

The extreme heatwave this year has caused a series of large wildfires in France, consuming a significant amount of water for firefighting and worsening the water shortage.

Norway, which generates a large amount of hydropower, has also become a negative factor by deciding to limit electricity exports due to the extreme heatwave. The Norwegian government stated that river water levels for hydropower are significantly lower than average and warned that if water levels do not recover, electricity exports will be restricted. Norway has been exporting electricity to Germany, the United Kingdom, and Denmark.

The drying up of the Rhine River, an important maritime transport route in Europe, due to the heatwave is also worsening the power shortage. As the water level of the Rhine River drops, the risk of ship sinking increases, disrupting maritime logistics transportation. William Peck, an analyst at raw material market analysis firm ICIS, explained, "The decline in the Rhine River water level in Germany is also a reason for rising electricity prices due to disrupted coal supply."

This year, there are also concerns that wind power generation is below average due to unusually weak winds.