The energy crisis continues to simmer, and households in many European countries are worried about rising electricity and gas bills.
According to the British "Guardian" reported on September 1, the latest analysis of the International Monetary Fund (IMF) shows that British households are "the most worried" - among Western European countries, the United Kingdom is the most dependent on natural gas for electricity and heating. With both gas and electricity prices rising, UK households will suffer the hardest hit.
In response to soaring energy prices, not only the UK, but many countries in Europe are looking for ways to help their troubled families. However, winter is approaching, and with the rise in demand for electricity and heating, many countries are no longer able to cope with their own efforts. On 9 September, the EUROPEAN Union will convene a special meeting of energy ministers to discuss energy prices.
UK households may not be able to afford the 'energy bill'
Recently, the BRITISH energy regulator "Natural Gas and Electricity Market Office" (Ofgem) announced that from October 1 this year, the annual energy bill ceiling for domestic households in the UK will be raised to 3549 pounds (about 28700 yuan), an increase of 80% compared with the current 1971 pounds (about 15848 yuan), equivalent to the average household to pay nearly 300 pounds a month energy bill.
August 25, 2022 local time, London, England, a local family oven turntable. Britons are preparing for the October price cap announced by British energy regulator Ofgem. Figure/IC photo
In the UK, energy bills consist of a number of costs, including wholesale costs for energy such as natural gas, network costs such as gas pipelines and cables, operating costs, environmental and social costs, VAT, supplier pre-tax margins, etc., reflecting the cost of electricity supplies from energy suppliers.
The £3,549 energy price cap is not the highest amount of all UK household energy bills, but rather refers to the average annual electricity and gas consumption of a typical household, meaning that 2-3 bedroom households use 12,000 kWh of gas and 2,900 kWh of electricity per year. Other types of households (e.g., 1-2- or 4-5-person households) will pay higher bills if they use more gas and electricity than typical households.
With nearly £300 a month on their energy bills, many Britons can't afford it, and they have spontaneously launched a "Don't Pay" campaign, calling for energy bills to be reduced to affordable levels, or they will collectively refuse to pay electricity and gas bills. According to the Financial Times, the number of people participating in the movement has exceeded 130,000 so far.
To make matters worse, the energy price cap will also soar sharply. Cornwall Insights, a UK energy consultancy, expects the energy bill cap to rise to £5,387 in January 2023 and surge further to £6,616 in April. The advisory body's forecast is indicative, with its October energy price forecasts only £5 less than the results officially announced by the UK energy regulator.
Combined with the latest forecasts for 2023, the British think tank Resolution Foundation analysis said that this will be a cost that many families cannot afford.
The think tank's chief executive, Tosten Bell, said: "In the upcoming winter 2022-2023, the average household (via direct debit) will have to pay an average of around £500 a month on their energy bill, while households with upfront fees are likely to be higher, with bills likely to exceed £700 next January alone, accounting for more than half of their monthly disposable income. It is reported that the ENERGY BILL in the UK mainly has two payment methods: direct debit and prepaid, and the energy ceiling of prepaid is higher.
The first to be hit will be low-income households. Sarah Walker, an energy professor at Newcastle University in the United Kingdom, told the Beijing News that the energy price cap is for home users who use electricity and natural gas, and it is not applicable to home users of oil and liquefied natural gas heating, but its price is also rising. "Any low-income group, or anyone living in a poorly insulated house, will struggle with energy bills in the winter."
Lisa Fischer, an analyst at climate change think tank E3G, also based on an analysis, said that the UK's housing energy efficiency is the lowest in Western Europe. For households living in two-thirds of the UK's energy-inefficient, rated D or worse houses, they will pay at least £1,000 more on their energy bills this winter.
Ruth Langdon, a member of the British social organization Fuel Poverty Action, pointed to extremes where "thousands of people will die in cold, wet houses" this winter unless the UK government takes further action.
CNBC and Forbes News pointed out that even if the British government adopts supportive measures, including an energy discount of 400 pounds per month from October 1 this year, it is not enough. If no more measures are introduced after the uk elects a new prime minister on September 5, this winter will be very difficult for many Families in the UK.
Imbalances between supply and demand of natural gas and high inflation "threaten" Europe
It's not just the UK that's facing soaring energy prices in Europe.
On August 17, 2022 local time, in Talbot Port, Uk., the steel plant operated by Tata Steel Company was located outside the residential area. Europe's heavy industry is crumbling under soaring electricity costs, which have hit energy-intensive manufacturers the hardest. Photo/Visual China
As the energy crisis continues to intensify, the benchmark electricity futures contract delivered by Germany next year exceeds 1,000 euros /MWh for the first time, and the base charge price in France in the coming year also exceeds 1,000 euros / MWh, reaching 1,200 euros / MWh, up about 12 times from the same period last year. In August, italy for the first time saw a spot price of electricity trading above €500/MWh.
In this regard, Walker explained that natural gas is used to generate electricity, and the price of electricity is often determined by fossil fuel plants such as natural gas that produce electricity. The wholesale cost of natural gas has risen, and so has the cost of electricity.
The deeper reason for the rise in wholesale natural gas prices is the imbalance between supply and demand of natural gas.
The demand for natural gas is increasing. Reuters noted that this summer, the sharp decline in nuclear power supply in France and the heat wave sweeping across Europe increased demand for natural gas. "The global economy's recovery from the COVID-19 pandemic has also led to a huge demand for natural gas." Walker said.
But the tight supply of natural gas means that energy suppliers have to pay higher wholesale prices for natural gas, and many energy companies have failed because they can't make a profit. Since the beginning of 2021, 31 UK energy companies have failed.
At the same time, the Russian-Ukrainian conflict has further reduced the supply of natural gas. Currently, the European Commission is implementing the REPowerEU program, which is expected to reduce imports of Russian gas by 100 billion cubic meters by the end of 2022. Walker said that the attempt by many European countries to reduce natural gas imports from Russia has led to supply constraints and is also the reason for the rise in gas prices.
The us "Time Magazine" analysis data found that the Dutch TTF natural gas futures price, which is regarded as the "european gas price vane", broke through $3,100 per 1,000 cubic meters in mid-August, up 610% from the same period last year. Europe's benchmark electricity price soared nearly 300 percent in 2022, breaking records, due to rising fuel costs. Taken together, energy prices are ten times the five-year average.
Reuters further pointed out that if there is an interruption in Russian gas supply, such as a complete halt to the transmission of natural gas through Nord Stream 1, it may make gas prices high. Although European countries say they are expected to refill their reservoirs to a minimum of 80 percent by Oct. 1, a cold winter could quickly deplete those reserves.
In the face of short supply of natural gas, wholesale natural gas and electricity prices in Europe continue to rise, which in turn pushes up Inflation in Europe. Deutsche Bank expects the price of gas and electricity in the UK to rise by around 80 per cent in 2022, with the average price increase of 40 per cent in 19 countries using the euro.
"Energy prices in the UK are higher compared to other economies in Europe. In fact, the UK is more dependent on natural gas. Sanjay Raja, chief UK economist at Deutsche Bank, said.
The analysis found that the UK relies heavily on natural gas for electricity generation and heating. The vast majority of households in the UK (85%) use natural gas for heating, compared to less than 50% in France and Germany. In 2021, Climate and Energy think tank Ember analyzed that of the 39 European countries, the UK relies on natural gas to produce the most electricity, with a share of 40%, while Germany and Denmark are 15% and 6% respectively.
The IMF analysis found that the difference in energy bills between poor and wealthy households in the UK is also greater than in other European countries.
Oya Selassen, director of the World Economic Research Division of the International Monetary Fund, said that in the context of soaring energy prices in Europe, the british poor and rich households have the most seriously divided energy expenditures. The analysis found that in 2022, an estimated 10% of the UK's poorest households will spend 17.8% of their budget on paying their energy bills, while the richest 10% will spend 6.1% of their budgets, with a difference of 11.7 percentage points the largest among the 25 European countries assessed to date. In France, the gap is 3.9 percentage points and in the Netherlands it is 2.5 percentage points.
The EU will convene an emergency meeting to deal with the energy crisis
Typically, around the winter season from October to March, natural gas demand in Europe is relatively high. As October approaches, many European governments are looking for ways to protect households from soaring energy prices.
The UK's energy supervisory authority has secured household electricity and gas consumption by capping energy prices and offering a £400 per month discount on energy bills. In addition, Walker proposes other solutions: "Improve the energy efficiency of households and businesses, reduce the demand for natural gas as soon as possible, increase the proportion of electricity generated by low-cost and clean renewable energy sources, and reform the electricity market so that electricity prices can be linked to renewables as much as possible." ”
Germany, which has been working to reduce its heavy dependence on Russian gas, has pledged to reduce the value-added tax on gas from 19 percent to 7 percent by March 2024 and approved two bailout programs totaling 30 billion euros. However, since Germany will levy a gas surcharge from October to subsidize loss-making gas operators, German households will have to pay nearly 500 euros (about 3442 yuan) more for natural gas per year.
On July 24, 2022, local time, in Berlin, Germany, the official residence of German President Steinmeier will turn off night lighting to save electricity. Figure/IC photo
Italy approved a new aid package worth about 17 billion euros in early August, expressed interest in taxing companies that profit from rising energy prices, and pushed for a gas price cap across Europe to help curb the price spike.
Like Italy, Spain has decided to tax energy companies that profit from rising energy prices and use the money raised to help people pay their bills. Spain has reduced the value-added tax on people's energy bills from 21% to 10% and the electricity tax from 7% to 0.5%. France directly asked state-owned energy supplier EDF to limit the increase in wholesale electricity prices to 4% for one year.
According to CCTV News, on August 29, local time, German Chancellor Scholz met with Czech Prime Minister Fiala in Prague. At a press conference held after the meeting, the two announced that the EU would jointly take measures to deal with rising electricity prices. Czech Prime Minister Fiala also revealed that the EU will hold a special meeting of energy ministers on September 9 to discuss energy prices.
According to the British "Guardian", so far, the EU has focused mostly on countries reducing natural gas consumption and filling gas storage facilities, and also importing more natural gas from the Middle East and the United States to curb high energy prices. However, even with these measures, natural gas demand remains high, prices are high, and the risk of power and heat outages in homes and businesses remains.
According to the analysis of Time Magazine, Europe has announced a number of renewable energy projects, new pipelines to import liquefied natural gas from the United States, Azerbaijan, increase nuclear power, etc., but these projects to replace Russia's energy supply in the short term is very difficult, short it takes at least 6 months, long it takes 10 years to complete, no project can be ready this winter, so reducing natural gas consumption is the only feasible way.
Beijing News reporter Zhu Yuehong
Edited by Bai Shuang Proofreader Li Lijun