Energy crisis worsens in Europe with stalemate over Nord Stream 2 and severe winter

Brussels/Moscow – New government in Germany has postponed the decision to approve the Nord Stream-2 pipeline. Two nuclear power plants in France have stopped due to technical reasons, leading to power shortage leading to a massive increase in power tariff across Europe. Last year, the cost of natural gas witnessed a rise of 450% in Europe. The electricity rate in the leading European country like Germany has reached 344 Euro per megawatt/hour, which is the highest. Analysts have warned that the only saviour for Europe could be that the temperatures do not slide further during this winter.

A few months ago, it did seem that the global economy was recovering from the Coronavirus pandemic crisis, which also reflected in the higher demand for fuel and power in certain countries. Due to constrained electricity production, countries like India, China, the United States, and a few European countries faced energy crises. China increased their imports, India increased production and US used its strategic reserves to overcome the energy demand. However, the European countries have still not recovered from the energy crisis and are currently facing a very challenging situation.

Russia has been repeatedly blamed for the energy crises in Europe. Natural gas is a major contributor to the energy basket of Europe. Russia meets nearly 30% of the natural gas demand. To increase the supply, Russia has built the Nord Stream-2 pipeline. The United States has imposed sanctions on the pipeline project. Germany, which was supporting Russia for this project, also has indicated a change in its stand. The new government in Germany has postponed the approval of the pipeline project for six months. It is claimed that Russia is aggravated by this move and has constricted Europe‘s natural gas supply. However, Russia has denied the claims.

While there is this delay in approving the Nord Stream-2, the real impact is due to the 14 nuclear power plants out of 56 in France, which are shut down till the next month. France is the exporter of electricity to the United Kingdom and other European countries. In this scenario of lower electricity production and higher demand, the European countries are forced to buy electricity at higher rates from the international market. The electricity rates in countries like France and Switzerland have reached 400 Euro per megawatt/hour.

The rising electricity rates have also started affecting the industry forcing some companies to cut down on their production plans. A report published by the European central bank warns about the energy crisis, which can push inflation up by 3% next year.