Day-ahead electricity prices have exploded to €431 MWh in Germany, and to €443 in France, testing the viability of the steel, aluminium, cement, and chemical sectors. “We’re way past the point where these industries are uneconomic. They will have to start shutting down,” said Thierry Bros, an energy consultant who used to run supply security for the French government.
The political class faces the invidious choice of keeping households warm or diverting scarce supplies to energy-intensive companies with subsidies to match. One or other must give.
The UK is of course in the same boat since it has subcontracted its storage to the EU to save a few pennies, which has in turn subcontracted the task to the Kremlin, via Gazprom-controlled sites on EU territory. The British do at least produce half their own gas from the North Sea and have a strategic relationship with Qatar – valuable when the chips are down – but all fates are linked by cross-Channel interconnectors.
Or at least they should be. Mr Bros says he fears that countries will hoard their own supplies of energy when push comes to shove. The only question is which government will strike first. “I believe that Macron will not be re-elected if there is a black-out in France. I assume he won’t allow exports, if this entails cutting gas and power to French industry,” he said.
“His lawyers will look through French law to find some pretext. Brussels would have to start infringement proceedings against France but that would take months, and by then winter would be over,” he said.
Europe’s energy crunch is rapidly turning into a broader political crisis for the EU system and the credibility of the political class, which has failed in a fundamental task of planning and administration.
It is running in parallel with a Covid wave that is again exposing grave deficiencies in health care systems, and as a result is leading to drastic forms of social coercion as the next line of defence.
“Tolerance for blackouts in the middle of winter is even lower than tolerance of lockdowns. I don’t see how any government can survive if that happens,” said Mr Bros.
The political landscape may look very different once these twin shocks have played themselves out in a weary and irascible population. The mood is unforgiving almost everywhere.
