Searing heatwave wreaks havoc on Europe’s strained energy system

The scorching heat wave in Europe is putting further strain on the continent’s energy system, putting upward pressure on electricity prices and increasing the risk of severe gas supply shortages this winter.

Record high temperatures this summer have pushed up energy demand for cooling and affected power generation from nuclear, hydro and coal sources at a time when Europe seeks to reduce its reliance on Russian gas .

“The hope was that the summer would bring some release to the European energy market,” said Fabian Ronningen, an analyst at Rystad, a consultancy. “But this heat wave will make the crisis worse later on and it looks bad for the winter. It’s close to our worst-case scenario.

Extremely high temperatures, which have fueled dangerous wildfires in Spain, Portugal, France and elsewhere, have been recorded across the continent as the UK Met Office issued its first ‘red warning’ for extreme heat.

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This has helped to drive up energy demand as consumers turn on air conditioners, to limit nuclear power generation in France and Switzerland because river water has become too hot, and to reduce the production of electricity due to droughts.

Disruption to electricity supplies caused by heatwaves – which are becoming more frequent and intense due to climate change, scientists say – has fueled record high electricity prices in parts of the world. Europe even as gas prices have fallen in recent days.

Electricity to be delivered the next day in France jumped 23% to a record high of €640 per megawatt-hour on Tuesday, as the heatwave exacerbated problems with the country’s nuclear fleet beset by maintenance problems. Before last winter, prices rarely exceeded €100 per megawatt hour.

Water from the rivers is used to cool French nuclear reactors, with the heated water being discharged into the rivers. However, the temperatures reach a regulatory threshold intended to prevent the discharge of heated water from harming the local environment.

The French regulator this month scrapped requirements for four power plants run by EDF – which the state is set to fully nationalize – “to ensure the security of the power grid” and allow the plants to continue operating.

Passengers watch a train fire near Zamora, Spain, July 18, 2022 in a social media screenshot

Passengers watch a train fire near Zamora, Spain, July 18, 2022 © Francisco Seone Perez/Reuters

“It is very unusual to raise these limits”, and this decision shows “how desperate” the French authorities are, said Reinhard Uhrig of Friends of the Earth Austria.

As a result, France, typically Europe’s largest electricity exporter, imports power from the UK and other countries, including Spain, to fill the gap.

William Peck, European electricity market analyst at ICIS, an energy analysis group, said wholesale electricity prices in France and Germany were on track to reach their weekly levels and highest monthly prices since market liberalization in the late 1990s, even after adjusting for inflation.

Elsewhere, high temperatures and low rainfall in Germany have taken the Rhine to its lowest July level in more than a decade. This has limited coal supplies to power stations and threatens a repeat of the 2018 drought that disrupted shipping and hit the country’s economy.

Uwe Kiwitt, captain of a ship that transports fuel to sites along the Rhine, said the heat wave had complicated his deliveries.

“As water levels drop, calculating how much can be transported becomes increasingly difficult,” said the employee of HGK Shipping, an inland shipping company. “Every ton we can take with us counts.”

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Additional pressures on the energy grid add to the challenge for Europe to fill its gas storage before winter, amid uncertainty over whether Russia will resume flows along the Nord Stream 1 gas pipeline to the Germany who have been suspended.

Renewable energy production has also decreased since the high pressure of hot summer days generates less wind. Gas and solar power plants also become less efficient in hot weather, and hydroelectric production drops as reservoirs dry up.

France’s hydroelectric output was 2.3 gigawatts on Sunday, compared to a daily average of 4.1 GW over the past seven years, according to RTE, the French transmission operator.

Europe is not alone in facing hot weather which has put pressure on energy supplies. Heat waves in China have caused power plants to burn more coal, pushing up prices that were already all-time highs. The United States is expected to use high levels of gas-fired power generation to stay cool during a heat wave plaguing Texas and other states, according to forecasts from S&P Global Commodity Insights.

With hot weather currently a problem for Europe, energy executives are pinning their hopes on mild weather to the rescue during the winter to help control demand.

“The weather is going to be more important than anything else this winter,” said Marco Alverà, former chief executive of Snam, the Italian gas pipeline operator. “We really have to cross our fingers that the winter will be warm.”

Additional reporting by Martin Arnold in Frankfurt

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