24.1 C
September 26, 2022

AEI report: Gas and electricity prices to hit unprecedented highs this winter

Gas and electricity prices will hit unprecedented highs this winter and many industrial consumers will go bankrupt, shows a report by the Intelligent Energy Association (AEI) released on Wednesday.

The price of natural gas hit a new record high on the Dutch TTF on Tuesday, at 251 euros/MWh, although the average temperature in Europe is 25 degrees Celsius.

According to the authors of the report, the most severe problem in the coming winter is the actual existence of energy supplies, which will prompt certain consumers or countries to offer no matter how much for gas, just to have it.

“Last year, the increase in the price of natural gas started in July, following the reduction of gas deliveries from Russia, against the background of the lack of long-term contractual obligations and of certain technical issues. This situation caused the price of gas to soar 463% compared to the maximum price recorded before the start of the conflict in Ukraine. History is repeating itself this year. The cut of gas supplies to European countries will bring about never seen before gas prices this winter,” the experts said.

AEI president Dumitru Chisalita recalls that in March 2022, during the debates on the OUG on capping gas and electricity prices, he stated: “According to the draft OUG, the price of natural gas sold by producers is set at 150 RON/MWh for natural gas which will be purchased for households and at 250 RON/MWh for the gas that will be purchased for heat producing consumers. Just like in the case of OUG No. 114, this will trigger an explosion in the price of gas for non-household consumers that consume more than 50,000 MWh/year. Specifically, these consumers will pay for almost all imported gas next year (approx. 80%), but also the difference between the market price and the capped price for domestically produced gas, that is, industrial consumers will pay a price of at least 1000 RON/MWh. I estimate that most industrial consumers with a consumption of more than 50,000 MWh/year will go bankrupt.”

According to the statistics authority, gas consumption decreased in the first six months of this year by 8.5%, and electricity consumption dropped 3.7% compared to last year. Given that many consumers have last year’s prices pinpointed in their contracts, effective until July – September this year, the impact of the current high prices will reflect in the companies’ activity only after this period.

At the end of 2022, as a result of the restriction of the activity of certain companies, especially of those consuming more than 50,000 MWh, the annual gas consumption might drop by up to 15% (the pledged gas savings percentage).

According to AEI, more than 4% of GDP is needed to cover payments to energy and gas suppliers. The report also cautions that the energy bill capping scheme should be modified, because it puts the gas supply security at jeopardy.

“When the sold gas and energy amounts become significant this winter, the suppliers will no longer be able to act as the state’s shadow loan agents (the banks will no longer finance suppliers due to the high risk they pose) and the probability of a financial gridlock on the gas and energy market will be imminent. The state’s satisfaction for protecting consumers with other people’s money is about to end and the continuation of this game endangers the security of gas supply,” the report shows.


Photo: www.pixabay.com

Related posts

July’s Bucharest Stock Exchange total trading value up 186 pct YoY

Nine O' Clock

Telekom Romania organizes the online conference “Agility in the organization – what does it mean and how does it help us to organize in the new reality”