Updated on September 16, 2021
The U.K.’s crunch is part of broader energy crisis in Europe, which has prompted governments to start taking action to ease the impact on consumers. Spain, Greece, France and Italy are all considering or enacting measures as households brace for a surge in bills. Goldman Sachs has warned of the risk of blackouts for industry...The accident in the converter comes just as windless weather has also left the U.K. without another major source of power. Nuclear outages are adding to the shortage and coal sites have been decommissioned, removing backup capacity.
National Grid sounded an early warning back in July that the U.K.’s ability to meet peak demand would be smaller this year. In one scenario they modeled -- with one interconnector knocked out and high demand -- margins would be the tightest in years.
The rest of Europe is on edge too, with the continent running out of time to refill gas storage sites before it gets cold. Flows from top suppliers Russia and Norway have been limited, and there’s a competition with Asia to snag liquefied natural gas cargoes. Traders betting that the controversial Nord Stream 2 pipeline linking Russia to Germany would start in the fourth quarter are likely to be disappointed.
The surge in the cost of carbon emissions -- traded on exchanges in Europe and the U.K. -- is also pushing up the cost of producing electricity. There’s some concern the crisis could cause a backlash against measures aimed at converting economies to greener fuels.
Energy prices in the U.K. have broken records again this week in what’s becoming nearly a daily occurrence.
Gas and electricity prices surged as weak winds added stress to a market already faced with low fossil fuel inventories. Higher costs are hitting Britain just as the economy is recovering from the pandemic, fueling concerns about inflation as millions are set to face steeper bills this winter.
