Electricity prices across Europe have seen a sharp increase as a prolonged heatwave prompts millions to rely on air conditioning and electric fans, simultaneously hindering power generation. Great Britain, in particular, has faced elevated costs for imported power, paying more than six times its typical rate on Tuesday evening to secure electricity from the continent.
The extreme weather conditions have created a dual challenge for the energy sector. High-pressure systems associated with the heatwave have led to significantly reduced wind speeds, impacting the output from wind farms. Concurrently, several gas plants across the UK have reported outages or reduced capacity due to the ambient high temperatures. This combination of surging demand and diminished supply has pushed wholesale electricity market prices to multi-year highs.
On Tuesday, the UK's energy system operator paid approximately £470 per megawatt-hour for electricity imports between 5pm and 7pm to meet peak demand. This figure starkly contrasts with an average market price of around £71/MWh in June last year and £123/MWh on Monday, underscoring the severity of the current market conditions. The loss of capacity from British gas plants, which tend to struggle in extreme heat, is estimated to be about 2.5 gigawatts, equivalent to powering 2.5 million UK homes.
The issue extends beyond the UK. In Germany, Europe's largest electricity market, prices were forecast to exceed €545 per megawatt-hour on Tuesday evening, marking the highest since June 2024. France, anticipating temperatures up to 43°C this week, has seen its power market price climb to over €268 per megawatt-hour, the highest since August 2023. This is partly due to high river water temperatures making it more difficult to cool nuclear reactors, further reducing generation.
Wind power generation, which typically accounts for about 30% of the UK's electricity in June, fell to between 13% and 15% on Tuesday due to the reduced wind speeds. To mitigate the impact, the National Energy System Operator has secured an additional 1.5 gigawatts of electricity, likely from continental Europe, which is grappling with its own heatwave-induced energy challenges. Households are also being encouraged to participate in schemes that reward them for cutting energy use during peak hours, aiming to save around 115 megawatts of electricity.