Energy prices will definitely be higher in 2022 than in previous years. Electricity and gas will become more expensive. What is causing the increase in energy prices and when will it stop?
Alongside the Covid crisis, Europe is also facing an energy crisis. It is talked about much less than the health crisis, but its duration and consequences could be as great as those of the pandemic.
Reasons for rising energy prices
There are several reasons for the increase in energy prices, and they began to accumulate in early autumn. We list them in no particular order of importance, as each factor played its role.
- Weather (dry spring, hot summer without wind)
- Transition to green energy (phasing out nuclear and coal-fired power plants)
- Inflation (efforts to revive economies weakened by the pandemic through artificial interventions by central banks)
- Increasing demand for emission allowances
- Problems with natural gas distribution
Emissions trading
Our experts are clear about this. "The increase in demand for emission allowances has naturally caused an increase in their price, which has been reflected in the price of electricity. A factor that also raises the price of energy is the stimulation of the economy through quantitative easing, i.e. printing money by central banks. As a result, inflation is growing worldwide. It should be noted that energy is purchased in the form of so-called futures contracts for one or more years in advance. The current price of an energy contract therefore also reflects the expected inflation for a year or more," explained Ing. Michal Kolimár, Director of the Energy Distribution Center and Energy Auditor of PPA Power DS, sro, which belongs to the group PPA CONTROL.
Energy prices for households are currently regulated and should not increase dramatically in 2022. However, they will increase in price, which was also confirmed by the Slovak National Electricity Regulatory Authority. Although the TPS for electricity is not yet known, it is assumed that regulated electricity prices in 2022 will reach approximately the level of regulated electricity prices in 2020. For gas, where the price for its supply is approximately 60% of the final price, the situation will be similar to that for electricity. Here, it is assumed that regulated prices in 2020 will increase compared to 2022 and will reach slightly above the level of regulated gas prices in 2020. The increase in prices for gas supply will depend on the customer's classification into a tariff group according to the amount of gas consumed.
What will replace cheap coal?
The way in which coal-fired electricity generation is replaced, which will end in Slovakia in two years, will also have an impact on the growth of electricity prices. Green solutions are desirable and necessary, but it must be said in one breath that they are certainly more expensive than coal.
One option is to use waste to produce electricity, which, after certain technological modifications, can be burned in existing coal-fired power plants. Modern waste incinerators In many countries, they are a solution to the waste problem and to obtaining electricity and heat in a more environmentally friendly way.
Will we learn to save?
The good news is that we will all learn to save more – both resources and our own wallets. Not everyone will like it, but the shortage or price of electricity will probably push us to do so – voluntarily or by force.
We really don't want to experience days when we have to endure planned power outages. Each of us has an indirect influence on whether we will have enough electricity, and on its price. Let's use it wisely.
