Prices for electricity and gas have skyrocketed in Europe last year and this winter, inflating energy bills for households and businesses, prompting governments to introduce relief measures while wondering how to counteract the underlying reasons for the energy crunch in the longer term. This factsheet – the first of a series of 3 on the energy crisis – explains how the gas shortage is affecting power prices, what the main reasons for the price hike are and what the merit order of the electricity market has to do with it, and what influence it has on overall inflation.
How much have energy prices increased in Germany and Europe ?
In Germany, the wholesale price for electricity (paid by power traders on the market) more than tripled in 2021 to an average of 97 euros per megawatt-hour (MWh) compared to the previous year, reaching the highest level in 20 years, the Institute of Energy Economics at the University of Cologne ( EWI ) finds in an analysis . While 2020 saw lower-than-normal demand for electricity, natural gas and hard coal , and therefore cheaper power, the economic recovery in 2021 sent energy prices skyrocketing. Natural gas in Europe cost as much as 150 euros/MWh. On average, gas prices in 2021 were approximately 49 euros/MWh higher and therefore five times as high as in 2020. Prices for imported hard coal also increased (to over 30 euros/MWh).
This means that between 2020 and 2021, the year-on-year increase in the price of electricity, gas and heating oil was the highest on record, comparison website Verivox has said . The price of gas climbed by almost 47 percent, meaning a household with an annual consumption of 20,000 kilowatt hours (kWh) paid more than 1,700 euros last year, up from about 1,160 euros in 2020. Electricity prices increased by more than 18 percent, meaning a household […]
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