Energy Prices in Europe Hit Records After Wind Stops Blowing

Heavy reliance on wind power, coupled with a shortage of natural gas, has led to a spike in energy prices

By Joe Wallace of The WSJ. 

In one of my classes this week we are reading the chapter about green energy in the book The Economics of Public Issues. It mentions that back up power (usually fossil fuel) is needed for when the wind does not blow. These backup power stations have to start and stop as the wind blows and that causes more pollution than if they ran constantly.

Excerpts from the WSJ article:

"Natural gas and electricity markets were already surging in Europe when a fresh catalyst emerged: The wind in the stormy North Sea stopped blowing.

The sudden slowdown in wind-driven electricity production off the coast of the U.K. in recent weeks whipsawed through regional energy markets. Gas and coal-fired electricity plants were called in to make up the shortfall from wind.

Natural-gas prices, already boosted by the pandemic recovery and a lack of fuel in storage caverns and tanks, hit all-time highs. Thermal coal, long shunned for its carbon emissions, has emerged from a long price slump as utilities are forced to turn on backup power sources.

The episode underscored the precarious state the region’s energy markets face heading into the long European winter. The electricity price shock was most acute in the U.K., which has leaned on wind farms to eradicate net carbon emissions by 2050. Prices for carbon credits, which electricity producers need to burn fossil fuels, are at records, too.'

"At their peak, U.K. electricity prices had more than doubled in September and were almost seven times as high as at the same point in 2020. Power markets also jumped in France, the Netherlands and Germany."

"In electricity markets, the cost of generation at the most expensive supplier determines prices for everyone. That means that when countries derive power from thermal plants with comparatively high running costs, it boosts prices for the whole market. Operating costs at fossil-fuel power plants are high right now after a relentless climb in prices for gas, coal and carbon permits."

"Electricity, gas, coal and carbon markets have a way of feeding on one another. High gas prices prompted utilities to burn more coal, so they had to buy more emissions allowances. Expensive carbon permits then prodded energy companies to turn back to gas, whose price rose again because the fuel is in short supply."

"Wind accounted for about a quarter of Great Britain’s power last year, according to the system operator National Grid. After the wind dropped this month, National Grid asked Électricité de France SA to restart its West Burton A coal power station in Nottinghamshire. That won’t be possible in the future: The government has said all coal plants must close by late 2024."

"To be sure, abundant wind power has at times led to periods of cheap electricity. This month, however, U.K. wind farms produced less than one gigawatt on certain days, according to Mr. Konstantinov. Full capacity stands at 24 gigawatts. Maintenance work on subsea cables restricted electricity imports from France."

"The price surge shows the need to have backup power supplies for moments when the wind doesn’t blow and the sun doesn’t shine, said Mark Dickinson, chief executive of Inspired PLC, which advises companies on energy costs and climate change.

Options include reserve thermal power plants, battery storage or cables for importing electricity from other markets."