The cost of electricity in Europe will rise by 27 per cent next summer due to higher gas prices and lower nuclear and hydroelectric generation, according to European analysts.
Higher carbon contracts will also help make fossil-fuelled generation more expensive in 2025. Any increase in solar generation is likely to be offset by a decline in hydro generation and the closure of some nuclear plants, Sabrina Kernbichler, lead power analyst at Energy Aspects Ltd, said. She also added:
“This leaves Europe to fill a similar fossil-fuel gap in summer 2025 compared with summer 2024, but at higher marginal costs.”
Energy Aspects forecasts that prices in Germany will average €93.80 per megawatt hour in July 2025. That’s €20 more than last summer.
More expensive electricity in the summer months, when solar generation is high, exposes the risks of Europe’s continued dependence on gas.
Energy Aspects forecasts that gas prices will rise by 33 per cent year-on-year next summer and carbon contracts by 13 per cent, pushing up the cost of running gas-fired power plants.
For example, the marginal cost of a 55% gas-fired power plant in Germany will rise by about 24 euros per megawatt hour on an annualised basis, Kernbichler said in an email.
While solar generation should set a record again, the closure of nuclear plants in Belgium will be a counterbalance. That’s a risk to Europe’s cheap energy supply, especially as hydro output declines next year, according to Daniel Muir, an analyst at S&P Global Commodity Insights. Muir said:
“The quickly deteriorating hydro situation in central and southeast Europe could cause some regional concern.”
Switzerland’s hydropower reserves are at a low level not seen since the winter of 2021, which preceded a summer of extreme drought.
