Cost of natural gas and electricity has surged across Europe, reaching records in some countries, as businesses re-open and workers return to the office. In Germany, wholesale power prices have risen more than 60% this year. Energy prices are rising around the world as the global economy emerges from the pandemic, fueling concerns about inflation. In Europe, plans to decarbonize the economy are also playing a part as utilities pay near-record prices to buy the pollution permits they need to keep producing power from fossil fuels. Add to those shortages of natural gas and the result is super-charged electricity prices, a bill consumers will eventually have to foot. Spain was already forced to cut energy taxes as power prices rose to a record, and the U.K. is expected to allow utilities to increase bills a second time this year, a move that will be announced Friday and affects 15 million people.
High energy costs are set to persist. Russia is flowing less gas to Europe and Asia is scooping up cargoes of liquefied natural gas, making it harder to refill depleted storage sites after a bitter winter. Benchmark European gas prices have already hit a record and all of that is fuelling power prices and boosting earnings for utilities including Germany’s RWE AG and France’s Engie SA. While Europe has the most ambitious de-carbonisation plans in the world, unveiling proposals last month to cut emissions by at least 55% by 2030 from 1990 levels, some countries have started to balk at parts of the agenda. France is lobbying behind the scenes to water down or delay the new proposed carbon market for heating and road transport. Several countries, including the Netherlands and Hungary, are also concerned about its social impact, according to European Union diplomats with knowledge of the talks. In the U.K., there are questions about the cost of meeting net zero. It’s still unclear how the government intends to deliver on the targets, including convincing 600,000 people a year to rip out their gas boilers and replace them with expensive heat pumps.