Europe’s power crisis moves north as water shortage worsens

Nordic electricity prices were five times higher in September than a year ago. It affects everyone from power-hungry factories and miners to college students struggling with their bills. Inflation is skyrocketing.

The northern corner of Europe cannot hide from the global shortage of natural gas and coal, with dwindling water resources curbing the region’s main source of electricity. Sweden relies on a 52-year-old factory that burns oil to keep the lights on, and a local utility is trying to convince industrial users to save energy as the cold weather approaches.

“The combination of low Scandinavian hydropower reservoirs and low European gas storage levels makes for a perfect storm, with high coal and carbon prices on top of that,” said Mats Persson, head of trade at Fortum Oyj. “With new power cables to Germany and the UK, the big price swings we’ve seen in Europe are entering the Scandinavian system.”

Norway’s hydropower levels are at their lowest in more than a decade for this time of year. Although some rain has fallen in recent days, the situation in southwestern Norway has been so bad that grid operator Statnett SF issued a warning to traders on Monday, saying that the wealth balance is at two on a scale where five means rationing. That corner of the country has the largest reservoir capacity and connections to Germany and Denmark, as well as a new cable to Great Britain.

The fill level was 52.3% for the week of September 20 in the area, the lowest since 2006 for that week. That raises concern just weeks before the critical turning point, when reservoirs begin to dwindle later in the fall.

“Normally the reservoirs fill up at this time of year, but in both August and September we had heat records and very little rain,” said Anders Gaudestad, executive vice president of power management at Agder Energi.

Water availability data is just as important to the energy market as the total number for European gas storage levels, which traders are looking at like hawks these days.

There is not enough water to export to both the continent and the UK, said Sigbjorn Seland, chief analyst at industry consultant StormGeo Nena AS. Britain and Ireland are arguably the hardest hit by the global gas shortage and are out of power.

“The idea that we are a green battery for Europe has been rocked a bit this winter,” said Andre Gustavsson, an analyst at Swedish utility Skelleftea Kraft AB, whose worst-case scenario is that rising prices will hit economic growth as businesses start up. curb the output.

Swedish utility Oresundskraft AB plans to ask some industrial customers to be flexible in their consumption. That could ease the strained power balance in the south, where Uniper SE’s oil-fired power plant regularly ran at full capacity in September.

Volatile prices continue as nuclear, coal and gas plants are being decommissioned, said Mats Gustavsson, vice president for energy at Swedish miner Boliden AB. The company has just signed a new long-term energy contract for a smelter in Norway.

“What’s dangerous is that the lowest price is constantly rising,” he said. “So if you want to cover yourself, you pay a much higher price.”

Rising prices could push inflation in Sweden above 3% in the coming months, a level last seen in 2008.

For the millions of homes and businesses that depend on electricity for most of their heating needs, the crisis is immediate. In fact, the worst-affected students have been forced to borrow to pay their sky-high bills, according to student leader Gesine Fischer.

Vegard Vardla, a 23-year-old student in Lillehammer outside Oslo, expects his monthly bill to double to about 1,400 Norwegian kroner ($160) when a flat rate for him and his roommate runs out in a few weeks.

“I may have to sacrifice some of my savings to pay the electric bill,” Vardla said.