ENER Europe Plans "Emergency Intervention" In Power Market As All Hell Breaks Loose

[Blacknarwhal]

Calm down, Europe. The government is here to help!

...oh boy.

Fair use cited so on and so forth.

Zerohedge

ZeroHedge - On a long enough timeline, the survival rate for everyone drops to zero

www.zerohedge.com

Europe Plans "Emergency Intervention" In Power Market As All Hell Breaks Loose​

by Tyler Durden
Monday, Aug 29, 2022 - 09:13 AM

With even Zoltan Pozsar warning that Europe faces an apocalypse of sorts now that the Eurussia divorce is complete and energy prices in Europe are hitting fresh daily record highs every single day - just today, German 1Year forward baseload electricity rose above €1000, or 10x where they were a year ago, before easing after European nat gas prices plunged the most since March after Germany said its gas stores are filling up faster than planned ahead of winter...



... moments ago the European Union appears to have finally realized that it faces an armed revolt this winter, or worse, when millions face freezing cold without power and heat (see "This Is Beyond Imagination": Polish Homeowners Line Up For Days To Buy Coal Ahead Of Winter"), and announced that it was planning "urgent steps" to push down soaring power prices, Commission President Ursula von der Leyen said on Monday.

"The skyrocketing electricity prices are now exposing, for different reasons, the limitations of our current electricity market design,” von der Leyen said in a speech at the Bled Strategic Summit in Slovenia, pointing out what has been obvious for years to those who warned repeatedly that Europe should probably not take make its energy policy based on the idiotic ravings of a self-absorbed, petulant, Scandinavian teenager. “It was developed under completely different circumstances and completely different purposes.”

Ah yes, it's the "circumstances and purposes" that are at fault, not Europe's catastrophic "green" push over the past decade that left the continent at the mercy of Putin, very much as one Donald J Trump warned would happen... and speaking of Putin, maybe Europe can impose a few more self-destructive sanctions on Russian energy exports. But we digress...

Ursula then added “that’s why we are now working on an emergency intervention and a structural reform of the electricity market", one which would look roughly like this.

The unprecedented spike in power prices, which have soared almost 10-fold in the past year, has fueled inflation, increased the economic burden on businesses and households recovering from the pandemic, and forced the ECB to aggressively hike rate in hopes of crushing demand into what is now a definite recession if not a depression. One could say that Putin couldn't have planned his revenge on Europe better.

According to Bloomberg, more and more member states are calling for a price cap and the Czech Republic, which holds the rotating presidency of the EU, plans to convene an extraordinary meeting of energy ministers on Sept. 9.
In other words, while the ECB plans to crush demand with tighter monetary conditions, European governments will ease demand and inject fiscal stimulus to avoid an angry mob descending on various local parliaments.

Of course, being a harebrained European "plan" which doesn't make any sense - just like anything else out of Europe - the exact details of an EU intervention plan are still being developed, and EU diplomats said the EU’s executive arm could offer a detailed plan as soon as this week. Don't hold your breath: after all, absent a massive ECB-funded stimulus - the proceeds of which will immediately go to Putin - unless Europe has somehow found brand new deposits of nat gas which are immediately accessible and don't require tens of billions and years of development to be extracted, what Europe is doing is just the latest jawboning.

With Russia squeezing gas deliveries, power-plant outages further sapping supply, while droughts and lack of wind make a mockery of "green" energy sources, the pressure is growing on EU leaders to act quickly or risk social unrest and political upheaval. Czech Prime Minister Petr Fiala is seeking backing for his price-cap plan and plans to discuss possible limits with German Chancellor Olaf Scholz.

“High energy prices are a Europe-wide problem that we need to tackle at European level,” Fiala said on his Twitter account. “Ahead of the EU Energy Council we want to find a way to help people and businesses that we can agree on with other European leaders.”
Czech officials are proposing to cap prices of natural gas used for power generation, Industry and Trade Minister Jozef Sikela said on Monday.

“We may open the question of emission allowances, as some other member states have done in past, that also present a major part of the total price,” Sikela said. “We may open the question of the overall market regulation, total decoupling of the prices,” adding that the bloc cannot meddle too much with the market or fuel speculation.

Amusingly, EU member states have already earmarked about 280 billion euros (or roughly the same in USD now that we are at parity) in measures such as tax cuts and subsidies to ease the pain of surging energy prices for businesses and consumers, but the aid risks being dwarfed by the scale of the crisis. In other words, the ECB will be hiking rates even as it has to inject even more liquidity into the market to enable the latest helicopter money stimulus. Governments have also started to limit energy use, banning outside lighting for buildings in Germany and lowering indoor heating temperatures, to meet the EU voluntary target of cutting gas demand by 15%.

On Saturday, Belgian Prime Minister Alexander De Croo warned that the EU can’t continue resolving the problem of sky-rocketing energy costs by cutting taxes and called for a price cap instead. Should the bloc fail to reach an agreement, Belgium will consider national measures, he told VTM television.

France last week reacted skeptically to the idea of setting limits on power prices, saying its situation is different from other European countries thanks to government measures offering protection against inflation.

In kneejerk response, some European commodity prices dipped from all time highs, while US nat gas slumped to session lows amid expectations Europe's "energy emergency" could mean fewer Us LNG exports. We doubt that, and in fact expect that the nat gas surge will continue as Europe doubles down in begging for every last drop of US, Canadian, Qatari LNG it can find.

 

[Marthanoir]

FEU

 

[Blacknarwhal]

FEU

Because price caps always work! ...right?

 

[raven]

price controls

 

[Dozdoats]

Emergency intervention = create more digits.

 

[Marthanoir]

German leader outlines vision for bigger and more coherent EU​

German Chancellor Olaf Scholz has called for a growing European Union to agree on a series of changes that would help it overcome internal divisions and stand up to external rivals such as Russia and China.

In a wide-ranging speech at Charles University in Prague, Czech Republic, Mr Scholz said the EU must make itself “fit” for future enlargement from 27 to 30 – or even 36 – nations by taking more decisions by majority vote, rather than requiring unanimity on all issues that has in the past allowed individual member states to veto key decisions.

“We have to remember that swearing allegiance to the principle of unanimity only works for as long as the pressure to act is low,” Mr Scholz said, arguing that Russia’s invasion of Ukraine was a wake-up call for the EU to change the way it takes decisions.

Mr Scholz suggested allowing majority decisions on pressing issues such as sanctions or human rights policy, with those unwilling to explicitly back a vote having the option to abstain without blocking unanimity.

The German leader also backed calls to reconsider the composition of the European Parliament, which currently has 751 deputies, to prevent it becoming “bloated” through future expansion.

A similar reform of the way each member state is represented in the bloc’s executive commission could see commissioners share responsibility in certain areas, he said.

With Europe lagging behind global rivals when it comes to digitalisation and space exploration, Mr Scholz said the EU could become a global leader in the transition to a greener economy that would also help it become less dependent on foreign energy suppliers.

In his address, Mr Scholz repeatedly cited the threat posed to the EU by Russia under its authoritarian president, warning that “any disunity among us, any weakness, is grist to (Vladimir) Putin’s mill”.

“We must close ranks, resolve old conflicts and find new solutions,” he said, noting that the bloc needs to overcome long-running tensions among its members on the issues of migration and fiscal policy.

Mr Scholz’s speech echoed proposals made in recent months by French President Emmanuel Macron.

But it is likely to be received warily by smaller countries that fear reforming the EU’s unwieldy decision-making processes to allow more votes to pass with two-third majorities could see their concerns ignored.

Tensions have also flared in recent years between the European Commission and the governments of Hungary and Poland, with Brussels accusing those countries of breaching the bloc’s fundamental values and the principle of rule of law.

Mr Scholz said the EU “cannot stand by when the principles of due process are violated and democratic oversight is dismantled”, but appealed for unity in the face of mounting pressure from outside.

“When, if not now, will we overcome the differences that have hobbled and divided us for years?” he asked.

Germany, which until recently lagged behind other Nato countries when it came to military spending, plans to invest heavily in its air defence in the coming years, said Mr Scholz.

The system will be designed so that its European neighbours can join, he said.

German leader outlines vision for bigger and more coherent EU | BreakingNews.ie

Olaf Scholz also backed calls to reconsider the composition of the European Parliament to prevent it becoming ‘bloated’ through future expansion.

www.breakingnews.ie

 

[Marthanoir]

Its all about power and control

 

[Marthanoir]

price controls

People controls

 

[Dozdoats]

Euroweenies ...

 

[Doomer Doug]

Winter officially starts 12-21-22 but it starts to bite mid to late October.

The odds ard good greta will hiding for her life by Thanksgiving.

 

[Melodi]

Honestly, I think the local governments are going to be first in line long before Greta who is largely not even on the scene over here much anymore (no big surprise there).

I don't think the individual governments and maybe even some of the "ruling elites" realized just HOW BAD, things look like they could get in the next four to six months. I think they really thought it would be "uncomfortable" but "manageable."

I think they are realizing that it may be a lot worse than uncomfortable and the Dutch Farmers have just given them a taste of what unmanageable could mean. While things have stayed relatively peaceful in the Netherlands (for a given degree of peace) the peasants are getting restless and they actually do have pitchforks.

It simply isn't true that all of Europe is totally disarmed, especially in the countryside, people may not have military-grade weapons as a general rule (except in some places like Sweden where veterans are encouraged to accidentally take them home, should Russia ever invade) but many farmers have shotguns and other things that go boom. They also have crossbows and other weapons, heck early on in the Ukraine Civil War reenactors got out trebuchets and used them fairly effectively on office buildings. Next time, it could be a government building somewhere in Western Europe. Then there are other "Poor Mans" weapons like homemade bombs or simply giant mobs of the sort that stormed the Bastile, only this time it might be storming whichever politician they blame for grandma freezing to death last week.

I am not saying these things will happen or suggesting that they should, I am saying it looks to me that someone in the EU Oligarchy works up about three days ago in a panicked cold sweat and realized how seriously grave the danger was and that they had mostly done it to themselves.

And unless they figure out a way to at least keep the population pacified and only moderately miserable this Winter, they may find out that high walls, electric fences, and security guards only go so far if people really feel they have nothing left to lose and they believe you are the ultimate cause of their misery.

A close look at history suggests that coming events will not be kind to them unless they figure a way out of this mess really-really fast.

 

[Blacknarwhal]

And unless they figure out a way to at least keep the population pacified and only moderately miserable this Winter, they may find out that high walls, electric fences, and security guards only go so far if people really feel they have nothing left to lose and they believe you are the ultimate cause of their misery.

A close look at history suggests that coming events will not be kind to them unless they figure a way out of this mess really-really fast.

If the security guards ALSO blame you, that makes it that much worse. Because now.....

View: https://www.youtube.com/watch?v=B3lsJmwNO40


the last 10 seconds will be the most relevant. And least bloody.

 

[Scrapman]

Money ain't gonna fix this problem. They need Nordstrom 2 . They listened to president potato head now they have to deal with the consequences.

 

[blueinterceptor]

Regarding price caps? What happens when the cost to produce the energy exceeds the capped price?


looks like the war in Ukraine is going to end or nato will fall apart, if the fix is turning on nordstrom 2

 

[WalknTrot]

Price caps. Been pondering as I've heard the term the past few days coming out of the EU aristocracy.
As hard as it is to believe, they must be talking price controls.
Clue: They don't work.

Even more than the 70's, the energy market is an international market. The EU elites don't control the market. They will end up buying what they need (or what their citizens demand) at market prices, like it or not. Then, they will either have to subsidize (greatly) or nail the public with the full, ugly reality.

Guess these folks didn't need to study history or economics to claw their way up to their high station in life. Sadly, a hard rain is gonna fall on the people with these idiots in charge.

 

[Zagdid]

European power prices shatter records as energy crisis intensifies

By Julia Horowitz, CNN Business

www.kten.com

European power prices shatter records as energy crisis intensifies​

3 hrs 8 mins ago Updated: 2 hrs 38 mins ago

By Julia Horowitz, CNN Business
Power prices in Europe continue to smash records, intensifying the region's energy crisis and fanning fears about access to electricity and heating as the weather begins to cool.

German power prices for next year, which are 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's incredibly volatile," said Fabian Rønningen, a senior analyst at Rystad Energy. "These prices are reaching levels now that we thought we would never see."

Prices have jumped since Russia's Gazprom announced that it would shut down the Nord Stream 1 gas pipeline for three days starting Wednesday to perform maintenance work, reigniting fears that Moscow could completely shut off gas to Europe, which is racing to stockpile supplies ahead of the winter.

When the crucial pipeline went offline for repairs for 10 days in July, many policymakers feared it wouldn't come back. When Russia did restart operations, flows were significantly reduced.

France's nuclear sector, which provides about 70% of the country's electricity, is also struggling with lower output, pushing up the country's energy prices.

The Czech Republic announced Monday that it would convene an emergency meeting of Europe's energy ministers in Brussels next week as the region hunts for solutions.

Businesses are concerned they may have to periodically halt operations over the winter if power is in short supply, while households could struggle to pay soaring heating bills. The fallout could trigger a deep recession.

There was some reason for optimism on Monday. German Economy Minister Robert Habeck said the country's gas inventories were filling up, and the country won't have to pay the high prices currently commanded by the market.
Germany's gas storage facilities are nearly 83% full and will reach the 85% threshold in early September, according to Habeck.

But huge uncertainty lingers. High power prices for next year indicate that traders don't think the crisis will be contained in the coming months, according to Rønningen.

"It may well be that we will have a number of winters where we have to somehow find solutions," Shell CEO Ben van Beurden said at a press conference in Norway on Monday.

Uniper, Germany's largest importer of natural gas, said Monday it would need more help from the government, asking for an additional €4 billion ($4 billion). The company said it's low on cash due to the shortfall in Russian exports, which is forcing it to pay sky-high market prices to fill gaps in supply.

 

[Hfcomms]

Open up Nord Stream 2 and do the maintenance on the turbines for NS1 and return them to Russia and pay in Rubles for the gas as Russia wants and the problem is if not solved at least patched for the time being. This isn't hurting Russia at all as they are making money hand over first right now. All Germany has to do is to certify the NS2 pipeline which is waiting to go.

This is one of the things that are too stupid to be stupid even for the leaders of the EU. Destroy your country to make Klaus Schwab along with the WEF and their benefactors happy? Why? Better pay attention what happened to Mussolini when the people had all they could take and weren't going to take it anymore. Got trees....check, got rope.....check all ready to go.

 

[Melodi]

Well there are a couple of complications, and I don't have a solution sadly but part of the problem is that as so often happens, "privatization" of what was once public utilities originally bought, build, and paid for by tax dollars were pretty much handed over to companies who only real goal was not providing energy but obtaining as much money as possible for their shareholders. That is how big corporations work and that should have been understood from the outset.

But from PGE in California to ESB here in Ireland, what tends to happen is that the focus on providing energy flies out the door almost the moment the ink is dried on the new contracts. So less money goes into maintenance (not that governments are much better about that), money going towards actually providing the product is seen as an "expense" and any way to avoid paying for the product becomes an "asset" and profits.

Now everything goes great until there's a disaster (natural or man-made) and/or an emergency on their hands. Almost overnight the "private" companies providing the service dropped out of the market (in the UK quite a few electric and gas companies just quit leaving consumers "out of contact"). Like rats fleeing a sinking ship they pull up stakes and run - but unlike REAL bankruptcies or sell-offs - no one can really sell off the electrical wires, pylons, production plants, gas pipelines, and the like.

There are always SOME groups making money and right now in Europe, it is the big overall producers like Royal Dutch Shell, BP, and others who then sell the gas or other fuels to the "private" companies (or in some countries they still public utilities) at whatever price the market will or even will bare.

Sorry this is a tad long, but it is complicated - however, that's enough to get you the idea because the other thing someone(s) woke up to about three days ago is that ultimately the National Governments are going to end up holding the bag when all the "private" utility companies either leave town, declare bankruptcy or tell the governments to give them taxpayer supports or they will shut down overnight.

That is exactly what happened to the banks in the UK, Ireland, and a few other places in 2008 - nationalization by the back door because you gotta have banks, just like you gotta have heat in the middle of a German Winter when half the population lives in buildings that can only be heated by gas and there are no more fireplaces.

They have also realized that electrical/gas rates for homeowners of 5,000 dollars plus a month simply won't be paid and small businesses can't go from bills of 30,000 to 200,000 a month either. They just close, they just hand the bank the keys.

I really think the "Eurocrats" thought they could keep prices high but payable, except for an "underclass" that could get some support if things got desperate, but they now realize that things are skyrocketing beyond anything they ever dreamed of and the whole house of cards is going to come crashing down around them if they don't sort something.

And yeah, that might even be temporary price controls at the point of access - that can't continue forever, but this isn't like a local "free market" where I agree to buy your tomatoes at such and such a price and if you price is too high I just don't buy tomatoes and get peas for supper instead.

This is corporatism gone wild meet some extremely stupid political decisions (shutting down the gas from Russia and magical thinking that renewables could do it all right now) and the harsh reality that says, find a way to keep people warm and fed or get ready for the consequences. And I mean that in the starkest terms imaginable.

This is the first time in nearly 30 years of being into preparedness and related stuff, that I have really felt things were at a near immediate crisis point (and it didn't involve a near third world as in the 1980s). I hope I'm wrong, so often doom scares everyone to death and then goes back to sleep for a time, but I'm concerned that this time it won't and I have no idea where exactly that will lead.

Probably the end of the EU at the very least, which wouldn't be a bad thing, but I'd rather see it happen some other way (like voting) than utter social breakdown and chaos.

 

[Old Greek]

Price caps. Been pondering as I've heard the term the past few days coming out of the EU aristocracy.
As hard as it is to believe, they must be talking price controls.
Clue: They don't work.

Even more than the 70's, the energy market is an international market. The EU elites don't control the market. They will end up buying what they need (or what their citizens demand) at market prices, like it or not. Then, they will either have to subsidize (greatly) or nail the public with the full, ugly reality.

Guess these folks didn't need to study history or economics to claw their way up to their high station in life. Sadly, a hard rain is gonna fall on the people with these idiots in charge.

Most (not all) so called leaders never worked at a real job at any time in their life. A lot of PHD's (piled higher and deeper)

 

[Melodi]

delete

 

[Old Gray Mare]

price controls

Another name for black market.

 

[Tripod]

Is there anything the government hasn't managed to screw up beyond repair? Hard to think of anything.
The ones that screwed it up are telling the people they will fix it, ya right.
Mike

 

[Josie]

Trump tried to warn these idiots and they laughed. Sadly, he was right once again, and it will be the regular people that will pay.

 

[Old Gray Mare]

Most (not all) so called leaders never worked at a real job at any time in their life. A lot of PHD's (piled higher and deeper)

Think any of them have ever known want? Hunger? Cold? Fear?

They don't get this right they may be in for education expanding experiences shorty. Tuition can be expensive.

 

[Melodi]

Is there anything the government hasn't managed to screw up beyond repair? Hard to think of anything.
The ones that screwed it up are telling the people they will fix it, ya right.
Mike

True, but pretending people (average people) are going to be able to just pay 5,000 Euros/dollars it's about the same right now) per month for electricity is also a total fantasy.

So is thinking that these big companies will just lower their prices, especially if the supplies are extremely limited or they have to pay those prices to get the energy.

In the end, they will just walk, and the government/taxpayer will be stuck with the problem anyway. Because somehow, someway, this has to be sorted.

It might be (as happened with the banks) a temporary government (or governments) taking over their own infrastructure (mostly taxpayer-built anyway) until the situation sorts out, and then selling it back to the private companies again.

To be fair (I try to be) the Big Corporations didn't come up with the idea of stopping Russian Oil and Gas or shutting down the pipeline. That was a political move, designed to hurt Russia that instead has backfired in the most spectacular way I can ever remember something backfiring on this level in my lifetime.

And that includes "Whip Inflation Now" although it might end up matching with "Just 15 days to stop the spread."...

 

[Melodi]

Think any of them have ever known want? Hunger? Cold? Fear?

They don't get this right they may be in for education expanding experiences shorty. Tuition can be expensive.

Some of the Eastern European Leaders do, note they are the ones still trying to do business with Russia at least for natural Gas....

 

[Millwright]

Its all about power and control

A dearth of power will give them more control.

Funny that.

 

[raven]

A dearth of power will give them more control.

Funny that.

Darth.
A Darth of Power . . . aka Klaus Schwab . . . will exercise more control.
Rationing. Price Controls. More use of shovels.

 

[Marthanoir]

A dearth of power will give them more control.

Funny that.

And you have the food crisis to come yet,
European harvests have been devastated by the heatwave & drought and was already suffering due to the shortage of fertilizer.
Animals were culled due to the lack of grain and then lack of water.

 

[Millwright]

And you have the food crisis to come yet,
European harvests have been devastated by the heatwave & drought and was already suffering due to the shortage of fertilizer.
Animals were culled due to the lack of grain and then lack of water.

Cold, Dark and Hungry....and no guns.

Pitchforks and torches for the government adjustment?

 

[Melodi]

Cold, Dark and Hungry....and no guns.

Pitchforks and torches for the government adjustment?

As I said, not quite no guns and there are other options also that people have. It is true there are a lot of guns that are registered, but in many places not all of them are. Americans (including me before I lived here) often have a very skewed idea of what Europeans, Irish, or folks in the United Kingdom are like.

Even England, which is probably one of the most disarmed countries on this side of the water still has a lot of farmers with shotguns and some "shooters" (in the US that would be hunters) with rifles.

When you get into Sweden, you are talking about one of the most heavily armed countries in Europe - both in terms of legally registered guns for hunting (especially in North Sweden) that will take to bears, elk, and Lynx; but also as I said the military at least used to quietly have veterans take their military weapons home and list them as "lost." In case Russia ever invaded it was their job to form the underground resistance. My husband was shown some of those guns by one of his hunting buddies who was a veteran.

And Germans! Boar hunting, deer hunting, and other types of hunting are popular sports as is going to Poland to hunt bigger game. Again most of the guns are registered but not all are.

Again, I am in no way advocating armed resistance, especially not at this time; I am saying pretending it won't happen because supposedly Europeans have no access to guns, bombs or other professional and homemade insidery devices is laughable. I haven't even gotten to the black powder and cannon reenactor folks, though that isn't legal in Ireland it is in the UK...

None of this would stand up against a real army (probably, except as a guerilla force) but it could make life very dangerous for a lot of elites in their families, some even inside their gated enclaves if people really-really lost it. Up until now, I think the powers that be were sure they wouldn't, that the population would just shiver and be grateful for their ration cards and warming stations (Germany is already setting those up).

And you know, they could be right, but someone(s) has just woken up to what could happen if they guess wrong.

 

[Melodi]

Usually, you don't get a lot of "new" articles this late (nearly 9 pm) in the local Irish press unless someone has a bar fight or there's a breaking news story in the United States or Australia.

Now, these stories are suddenly showing up just in time for the nine o'clock news on the TV and the radio - like I said, about 72 hours ago, somebody woke up and went "Oh...holy f...k" and now that is spreading around Europe - FAST.

'Absurd and frightening': How high could 'skyrocketing' energy prices go this winter?

Tough choices lie ahead in both the short and long term.

www.thejournal.ie

'Absurd and frightening': How high could 'skyrocketing' energy prices go this winter?​

Tough choices lie ahead in both the short and long term.​

51 minutes ago 5,417 Views 10 Comments
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Image: Shutterstock/Sergey Neanderthalec
THE ONLY CERTAINTY around the current energy price crisis is that it’s likely to get worse in the coming months and year ahead, experts agree.

Governments could be forced to intervene further to help struggling families but one energy researcher who spoke to The Journal said a “pragmatic” approach may be required that helps vulnerable people more than those with greater financial means.

The latest shock to the inflationary landscape took place on Friday when SSE Airtricity announced gas and energy hikes that could add over €1,000 to the combined annual cost of bills.

This increase came on the back of a similar hike by Electric Ireland in July and more increases are expected when the demand for energy gets further squeezed in the winter months.

The outlook for the coming months was brought into sharper focus by regulators in the UK last week, when it was confirmed that the energy price cap was to almost double from £1,971 to £3,549 (€4,158) .

It will remain in place until 31 December, when it will be adjusted again, with latest forecasts warning bills could surge again to around £5,400 in January and around £7,000 in April.

The UK price cap essentially limits the amount suppliers can charge for each unit of gas and electricity they supply. Although the system is different to Ireland’s, the rising value of the cap can perhaps be taken as a forecast of the kind of increases customers here may be facing.

Speaking to The Journal, Daragh Cassidy of price comparison website Bonkers.ie says that while Ireland’s prices may not jump as high as the UK’s, they are currently at similar levels.

At the moment the average gas and electricity bill (in Ireland) is about €4,000. In the UK, they have the energy price cap, so their market is a little bit different, but it’s not far off. In the UK the price cap is just over £3,500, so about €4,200, but they’re expecting the price cap to go to the equivalent of over €6,000 in January, and to be honest, I wouldn’t be surprised if we’d be that far off it.

Cassidy says Irish consumers have so far had to deal with energy prices that have doubled since the start of last year, increasing by an average of €1,500-€1,600.

The outlook is for even more of the same due to the price of gas on global markets, which is up tenfold in the past year. It’s an increase Cassidy describes as “astronomical”.

“In the 70s when we had the oil crisis the price of oil went up by I think 400%, now we have the price of gas going up by around 1,000%,” he says.


The same but different
Companies in the energy market are roughly divided into extractors, generators and suppliers – but revenues being made are each not in proportion.

British oil giant BP’s net profit increased threefold in the second quarter of this year compared to the same period in 2021. Shell had a fivefold surge in net profit in this time.

Dr Paul Deane, research fellow at UCC’S MaREI institute, explains that extractors are getting massive prices for their fossil fuels with the cost of electricity generation skyrocketing as a result.

Deane describes the current price of wholesale gas as “absurd and frightening” and adds that Ireland is at the mercy of market prices despite not physically getting our gas from Russia.

It fundamentally comes down to the fact that we generate most of our electricity from natural gas in Ireland. We purchase most of that gas from international markets and while we’re physically not connected to Russia via pipeline, we’re connected via market prices, and the market prices of gas have skyrocketed.

He adds: “The prices that we’re seeing for gas at the moment, the increases in the last two weeks, are frightening. They’re really shocking, so the outlook is not good for supply companies, because when you generate most of your electricity from a fuel that costs a huge price, unfortunately, we as consumers have to pay for that.”

Both Cassidy and Deane agree that while the profits of energy companies are an issue that has to be looked at, it’s not simply that they’re squeezing consumers.

Cassidy says that for every €100 on a customer’s bill, about €10 is profit for a supplier.

“They don’t necessarily make, some of them anyway, vast vast profits. They may make a profit of maybe the equivalent of €200- €300 at most per customer over a whole year,” he says.

Deane argues that while some companies may be making revenues from the supply of side of the businesses, they may be using that to insulate them from losses being made elsewhere

“I don’t think it’s correct or fair to say that they’re making lots of profits, they might be generating revenue but they’re using a lot of that revenue to offset losses on the sale of electricity,” he says.

I would expect retail prices to be much, much higher in Ireland than what they’re at now. I’m sure readers will be shocked to hear that people might think prices are relatively low but when you look at the cost of generating electricity in Ireland and if you look at the cost of natural gas, there’s a mismatch there.

“So prices, even though they’re record high, they’re being kept artificially low because they’re using revenues from generating electricity to absorb losses on the supply of electricity. If suppliers passed through the full cost of generating electricity in Ireland, I’d expect prices to be much, much, much higher.”

RELATED READS​

26.08.22Price hikes: SSE Airtricity to increase gas bills by 39% and electricity by 35.4%
06.08.2217,000 apply for emergency social welfare payments for food, fuel and clothing in July alone
03.08.22Taoiseach says he doesn't anticipate fuel rationing in coming months

What can be done?
Earlier today, EU Commission president Ursula von der Leyen said officials were “working on an emergency intervention and a structural reform of the electricity market”.

Von der Leyen said the current crisis was “exposing the limitations” of the current structure, with EU energy ministers set to hold urgent talks in Brussels on 9 September.

Irish MEP Com Markey is among those who has called for an “EU wide cap” on prices and said that efforts must be made to”decouple electricity and gas prices altogether.”

Long-term, the solution is to move away from fossil fuels completely but as Deane tells The Journal, “time isn’t on our side”.

In the short-term, national governments will have to try to ameliorate the effect of price rises, with the upcoming Budget brought forward to next month for precisely this reason.

The Irish government has already implemented €2.4 billion in measures to help people with the cost-of-living but further measures have been suggested, including another energy credit and a so-called “windfall tax” on energy companies.

In an Irish context, any such windfall tax is not likely to be a huge revenue-raiser given the international dimension of the sector and the fact that, for example, ESB is 95%-owned by the Irish State.

It is however seen as a political imperative to demonstrate solidarity with people struggling to pay bills.
With the Budget four weeks away, Deane argues that tough choices will have to be made.

“There’s two things we need to do in terms of the regulator and government, we need to be pragmatic but compassionate,” he says.

Pragmatic in terms of, we can’t protect everybody from the soaring energy prices in the future. Those of us who can are going to have to reduce our electricity use and those who can’t need to be protected.

“So you need to look at the elderly, the vulnerable, the sick. They need as much protection as possible, and then the rest of us if you’re fit healthy and well, we’ll just have to soak up the extra costs. We can’t protect everyone.”

 

[Old Gray Mare]

True, but pretending people (average people) are going to be able to just pay 5,000 Euros/dollars it's about the same right now) per month for electricity is also a total fantasy.

Do you think they know or care what the expense of an added 5,000 Euros would do to the middle class or working poor in the EU?

 

[Mark D]

Dang. Just dang. What did anyone over there expect would happen when they couldn't get all of that energy from Russia? Herds of unicorns with magical home-heating farts?

If Europe is in for the same level of Winter we're being told will hit the U.S., I can foresee things becoming VERY grim over there during November/December/January.

 

[subnet]

So..no changing the greenie cult laws or regulations just put a cap on prices ..smh

 

[SSTemplar]

Somebody is going to wish they had not shut those nasty nuclear power plants down.

 

[Kathy in FL]

Germany is planning on infecting the rest of Europe with its post WW’s economic disasters.

 

[223shootersc]

Most of Europe has always felt like they were superior and didn't need to listen to America. We have already had to rescue them from their-selves twice

 

[kyrsyan]

I think I might need to start keeping an eye out for the style of kerosene heater I prefer. And clean up the one I have. And go get all the kerosene canisters filled up.

 

[Melodi]

Do you think they know or care what the expense of an added 5,000 Euros would do to the middle class or working poor in the EU?

The EU leadership probably does now, having realized that there are a lot more EU "regular people" than there are of them.

Also, a few of them, maybe not many but a few of them have historical and/or classical education and they KNOW what happens when populations who have had a decent life are suddenly thrust into dire poverty by hunger and cold.

The French revolution is one relatively recent example of what happens when a formerly middle-class population which, mostly used to have three meals a day (with bread at the center of those meals) and the occasional luxury like a cup of coffee or tobacco suddenly see their children starving to death.

Finally, I suspect some of the exact same things are likely to happen in North America, they may take a few months longer and the worst might not hit until the Winter of 2023, but unless trends change (and they could) I'd be looking at heaters, wood stoves and food sources (most people here already are, I know that).

Already downtrodden peasants or populations very seldom seriously revolt if things have been that way for centuries, but peasant revolts do happen when things have improved, people are used to a better standard of living and suddenly it all goes away.

But in most of history, it is the artisan/working classes that start the revolts when the rug is pulled out from under them. Even ones that are suppressed like the Luddites started out because highly paid professional weavers suddenly were redundant and their families left to starve.