Energy prices surge across Europe as nearly ‘80 million’ live in energy poverty

Economics
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In 2021, energy costs skyrocketed across Europe, according to a report from the Institute for Energy Research. | Pixabay/Pexels

Skyrocketing energy prices in Europe are causing businesses and industries to close.

For the last two decades, according to reports from the Institute for Energy Research (IER), Europe has been closing coal plants in favor of wind energy. However, the amount of wind energy generated recently decreased and the resulting demand for natural gas has caused prices to surge and European countries to be more reliant on Russian-supplied natural gas.

"The result was manufacturing, and fertilizer plants were forced to close, some power suppliers went out of business, carbon dioxide emissions increased, and about 80 million Europeans are now living in energy poverty—up from 50 million in 2019," according to IER.

Weaker winds in 2021 led to a decline in wind-generated electricity in Europe, causing an increase in the demand for power from thermal plants, Reuters reported. However, prices increased due to limited natural gas supplies and weaker wind periods are not uncommon, according to Reuters.

Britain, Germany, and Denmark are Europe's largest wind producers. In the third quarter of 2021, they produced 14% of installed capacity compared to 20% to 26% on average over previous years, according to Reuters. The volatility seen with wind energy resulted in sharp profit declines for several companies in 2021, that, combined with the increased reliance on traditional fuels during the first half of 2021, resulted in a 25% increase in carbon dioxide emissions.

Gas prices in Europe have also doubled and are nearly 15 times more expensive than in the United States, IER reported. France has also closed three nuclear plants to check for faults.

In December 2021, Europe’s largest aluminum smelter, Aluminum Dunkerque, decreased production approximately 3.7% due to the increase in energy prices, according to IER. Alcoa Corp. is also planning to halt primary aluminum production at its plant in Spain for two years. 

In the United Kingdom, 28 energy suppliers that served over 4.2 million households have failed, IER reported. These failures come as a result of skyrocketing energy prices that, currently, cannot be passed onto consumers due to caps on the prices that energy companies can charge consumers. The price cap is expected to increase by nearly $1,000 in April, which will likely raise bills for consumers. In the meantime, the failed companies are being run by court appointed individuals.

The European Union has drafted plans that would include some nuclear and natural gas energy projects in the green energy standards that have been created. This would alleviate many energy difficulties if passed.

Finland recently completed construction of Europe's largest nuclear plant, which will supply 15% of the country's energy needs when fully operational, IER reported. The Netherlands, France, and Britain have all shown interest in producing more nuclear energy.