Europe’s Full-Scale Energy Crisis: ‘A Warning to the U.S.’

The European benchmark index measuring future electricity prices increased to a record $993 per megawatt hour (MWh) on Monday, days after prices in France and Germany surged 25%, according to European Energy Exchange data compiled by Bloomberg. By comparison, the average price of electricity in the U.S. hit $129 per MWh in June, federal data showed.

The energy crisis has forced consumers to cut back on power consumption, industrial production declines and energy rationing across the continent. The European Union Council (EU) scheduled an emergency meeting of EU energy ministers slated for next week in response to the market conditions.

“The skyrocketing electricity prices are now exposing, for different reasons, the limitations of our current electricity market design,” European Commission President Ursula von der Leyen remarked during a speech Monday. “It was developed under completely different circumstances and for completely different purposes. It is no longer fit for purpose.”

Von der Leyen blamed the record price increases on Russia’s invasion of Ukraine which has upended global energy markets but added that the crisis was evidence the bloc needed to transition further to green energy. Russia has throttled natural gas supplies to Europe in response to the EU’s sanction packages introduced following the February invasion.

However, electricity prices in Europe hit all-time highs months before the invasion.

A Reuters analysis published in December concluded that lower-than-expected wind power generation was a major factor sending prices higher and forcing suppliers to turn back to coal and natural gas. Russia was the largest provider of Europe’s natural gas and coal imports at the time of the invasion.