The European trick – gas is not getting more expensive, and the price of electricity is rising

Sergey Kondratiev, Principal Director on Economic Studies and Alexey Belogoryev, Research and Development Director of the Institute for Energy and Finance commented to Baltnews on the dynamics of retail and wholesale electricity prices in the EU countries.

As Alexey Belogoryev noted, it is important to remember about the different cost of wholesale and retail electricity prices.

"In addition to the cost of gas, an even greater tax burden is included in the price, which differs greatly in different countries. That is why we see a big run-up in the growth of value among different members of the European Union. Interestingly, wholesale prices this fall are even lower than in the summer of 2021," Belogoryev said.

"It is quite possible that the price of electricity in the EU will still decrease in the second half of 2023. However, it will also depend on how serious the support will be provided by the government, which has subsidized utility tariffs in recent years," he added.

"It should be understood that for many European end consumers, electricity prices are formed on the wholesale market with a semi-annual, and sometimes with an annual, time lag. This is due to the fact that many consumers conclude relevant contracts with suppliers, so the latter cannot increase the cost immediately, but only after a certain period. Simply put, due to the fact that the supplier is limited within the framework of additional price indexing, he raises them in six months or a year. Today we see such a cost of electricity, since the costs of its production have seriously increased in 2022," the analyst says.

"The potential for reducing electricity prices due to the "peaceful atom" is minimal. Companies cannot constantly offer below-market prices, but at the same time constantly invest in the modernization and repair of reactors. New nuclear power plants could solve this problem. But they will appear mainly only in France and, I would say, not earlier than in 10-15 years, since the relevant projects are only now being approved. And considering how the French company built and launched a nuclear power plant in Finland almost for 10 years later, we can assume that it will take longer," Sergey Kondratiev concluded.