Electricity prices hit record highs: gas and air conditioning are driving up costs

Electricity: wholesale prices are rising in Italia. On Monday 3 August, the average daily price reached 197.71 euros per megawatt-hour, the highest level since January 2023. On Sunday, the price stood at 165.39: it rose by 19.5 per cent in 24 hours and reached a high of 305 euros during the day. The forecast price for Tuesday 4 August is slightly lower at 194.94 euros per MWh.

“August began with wholesale electricity prices soaring,” confirms Davide Tabarelli, chairman of Nomisma Energia. “There are various factors influencing this trend,” he explains. The first is the price of gas, which rose over the summer and continues to account for the majority of electricity generation in Italia, setting the marginal price for most sources (for example, renewables, ed.) during the relevant quarter-hour periods. Italian combined-cycle gas-fired power stations are currently facing some difficulties due to a shortage of the water needed to cool the plants, although there do not appear to be any shutdowns.”

“This situation,” continues Tabarelli, “is part of a challenging European context, with a capacity shortfall originating in France – from where we import most of our energy – which is driving up prices. This is happening against a backdrop of persistently high demand. In Italia, the difference between the wholesale price and the cost of production for gas-fired power stations has soared in recent days to 50 euros per MWh. There is a peak in demand for air conditioning, due to temperatures more than 5°C above the seasonal average. Added to this is industrial demand that remains strong despite the holiday period, with many businesses postponing their closures – unlike in the past.”

“Hydroelectric generation is also at rock bottom across Europe at the moment,” adds Tabarelli, who hopes that what happened in Hungary with the Paks nuclear power station – which was brought to a complete standstill due to low water levels in the Danube – does not happen in France: “Otherwise, we’ll face even worse trouble with prices.” In Romania too, again due to the low water level of the Danube, two reactors at the Cernavoda power station have been shut down.

Nuclear power generation faces the same cooling problem that also affects gas-fired power stations. At the height of the heatwave, over nine gigawatts across twelve French reactors were subject to output reductions or shutdowns – a figure equivalent to around 15 per cent of the country’s nuclear capacity.