The energy crisis in Europe is "on a scale of scariness" and the problems are making it worse, said Fabian Ronningen, senior analyst at Rystad Energy, Business Insider reported.

"From one to ten, I would probably give it eight," Ronningen told Insider of the scale of the crisis. "I think that's how bad it is at the moment. Scary is a good way to describe it."

 

The energy crisis in Europe has left Germany, France and other countries worried about supply shortages.

Obviously, in response to the sanctions, Russia reduced natural gas supplies to Europe via the Nord Stream 1 gas pipeline by only 20%, which led to a sharp increase in prices. Russian state energy giant Gazprom said natural gas prices in Europe could rise another 60% this winter as exports to the region continue to fall.

In the spring of 2022, Dutch wholesale prices for natural gas, the European benchmark, soared to a record high of almost 335 euros per MWh, Reuters reported. Prices have since dropped to around 225 euros per MWh – still a jump of around 300% since the start of 2022.

The situation is exacerbated by the growing energy-related problems in Norway, France, Germany and Russia. "Over the last few weeks, you're getting that increasing feeling of, 'how bad can it get?'," Ronningen said.

Insider delved into the problems of these four countries, which seem to be exacerbating Europe's energy crisis.

Norway

Norway, which gets almost all of its electricity from hydropower, said it plans to cut electricity exports after a dry spring.

The country is among the leading exporters of electricity in Europe, sending about a fifth of its production to neighboring countries. After a period of dry weather in Europe, low water levels in hydroelectric power plants in southern Norway have forced the government to take action to preserve domestic supplies.

Terje Aasland, Norway's oil and energy minister, said recently that the government will prioritize filling its hydro storage facilities over exporting electricity to Europe.

"This is a really big issue," Rystad's Ronningen said.

Germany

A record heatwave in Germany has led to a sharp drop in the water level in the Rhine River, an important artery for the flow of goods throughout Europe. According to the German Federal Institute of Hydrology, river levels in Central Europe are at 'unusually low' and continue to decline. The low water level affected the supply of coal to two power plants in Germany, one in Mannheim and the other in Karlsruhe.

After Russia cut natural gas supplies to Europe via the key Nord Stream 1 gas pipeline, Germany and other countries have launched plans to restart idle coal-fired power plants to ease the supply gap.

Coal will be critical to Europe's energy supply this winter if Russia completely cuts off natural gas supplies to the region.

France

France, which gets about 70% of its electricity from nuclear power, is the world's largest net exporter of electricity due to low production costs, according to the World Nuclear Association. But France has to import more electricity as it struggles with disruptions in its nuclear facilities, with half of them offline, pushing up prices.

French nuclear power plants have been allowed to break environmental regulations so they can keep running to keep the country's electricity production stable and save natural gas for the winter.

The French Nuclear Safety Authority has authorized a temporary exemption allowing five power plants to discharge more than the allowed amount of hot water into rivers. In normal times, according to French environmental regulations, nuclear power plants must reduce or stop production when the temperature of nearby rivers rises above the point at which they can harm the environment.

Ronningen told Insider that even though EDF, Europe's largest nuclear power operator, has said it thinks output will pick up by winter, there is still a lot of uncertainty. “It seems to me that it is difficult for market participants to fully believe this, because the prices for French electricity in winter are much higher than the prices in Germany,” Ronningen said.

Russia

Russia is at the center of Europe's energy crisis.

European Union sanctions against Moscow, aimed at banning 90% of Russian oil imports by the end of 2022, seem to have prompted a retaliation from the Kremlin. In early July, Russian state energy giant Gazprom cut natural gas flows to Europe via the key Nord Stream 1 gas pipeline by 20%, having previously cut flows to 40% of capacity.

Europe is Moscow's biggest buyer of natural gas, and limited supplies have driven prices up sharply. There are fears that Russia could plunge Europe into a deep recession if it completely cuts off supplies.

 "One thing for sure is it's going to be a very, very high-priced winter for European consumers because there's still so many uncertainties on what can happen," Ronningen added.