Home ›› 19 Sep 2021 ›› World Biz
Several European power firms have been shut out of bumper revenues from record high gas and electricity prices as their sales are largely locked in at lower prices, and face extra pressure from governments acting to protect consumers.
Power generators say government intervention could prevent longer-term investment needed to drive the bloc’s energy transition plans, while smaller retail suppliers without the capital to hedge could go bust - limiting choice for consumers.
Benchmark European gas prices have soared some 250 per cent this year due to a number of factors such as low stock levels, high demand in Asia and infrastructure outages, taking power prices to record highs across Britain and Europe.
In theory it should be a profitable time for generators with nuclear or renewable wind, solar and hydro generation, able to benefit from the high wholesale prices without also needing to pay the higher coal and gas input costs.
But with most generators having already hedged their forward sales they say there has been little opportunity to benefit, while government action in Spain has prompted an outcry.
“Electricity companies forward-sold 100 per cent of their base production (hydro, nuclear and renewable) in 2021 and more than 75 per cent of their 2022 production months ago, at much lower prices than the spot market,” Spain’s electricity providers association AELEC, formed of EDP , Endesa , Iberdrola and Viesgo, said.
Endesa, a unit of Europe’s biggest utility Enel blamed the impact of soaring gas prices for a 3 per cent drop in earnings for the first half of the year.
Spooked by the impact on consumers, with many households still struggling with the economic impact of COVID-19, the Spanish government swooped to ensure generators don’t make windfall profits, and claw back the perceived excess.
