Energy prices tripling 'within the realm of possibility' amid Putin's foothold on supplies

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Market expert Dr Karen Pittel has warned energy bills tripling is “within the realm of possibility” as the global gas supply continues to falter as a result of Vladimir Putin’s war in Ukraine. The Director at the IFO Center for Energy, Climate and Exhaustible Resources has spelt out the real-term economic impact the conflict in Ukraine could have on the energy prices if Putin maintains his iron grip on supply. 

Dr Pittel told CNBC: “I mean, in estimate so far, that a doubling or even tripling the gas of the gas prices for consumers are within the realm of possibility.

“I mean, we have seen in the recent weeks, almost a more than a doubling actually, of the gas prices at the exchange.

“The question is, does that go any farther?

“How much do the markets already anticipate that there might not be a restoration of the deliveries from Russia? So that is something that we cannot answer at the moment, but given the history, I think it’s fair to assume that the fair share is really priced in already.”

On Monday, the Department for Business, Energy and Industrial Strategy (BEIS) launched a “transformational” review into the network amid scrutiny over energy security and pricing.

After almost a year of preparations, the Government has now published a consultation document which outlines potential changes it believes could “cut costs of electricity for consumers”.

Energy bills for the average household jumped by 54 percent to a record £1,971 in April as natural gas prices surge following the invasion of Ukraine by Russia.

Prices are set to rocket further this year, with experts at Cornwall Insight predicting earlier this month that average bills could leap to £3,245 in October and then further to £3,364 at the start of next year.

It is understood that some potential changes within the Review of Electricity Market Arrangements (Rema) could take place as soon as the middle of next year, although many aspects to take much longer to implement.

The consultation will focus on the wholesale energy market as experts from the department separately looking into potential changes for retail customers.

It said the review will consider possible changes such as locational pricing, which could result in households in areas with significant levels of renewable energy production, such as Scotland, being able to purchase energy at cheaper rates.

Pricing could also be linked more closely to demand, meaning providers could incentivise customers with cheaper energy at times of low demand or when production levels rise, such as during high winds.

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Meanwhile in Germany, the economy ministry said on Monday that Berlin may extend the life of its three remaining nuclear power plants, as public support rises in the face of a possible cut-off of Russian gas.

Germany’s remaining nuclear plants are scheduled to be shut down by year-end after former Chancellor Angela Merkel pledged to phase out nuclear power following the meltdown at the Fukushima nuclear plant in Japan in 2011.

The three plants made up 6 percent of Germany’s power production in the first quarter of 2022.

A first assessment by the environment and economy ministries in March did not recommend extending the plants’ lifetime, citing legal, licensing and insurance challenges, the need for extensive and possibly costly safety checks, and a lack of fuel rods to keep the plants running.



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