According to Bloomberg's report on the 6th, water levels in various reservoirs across Europe are at abnormally low levels, from Northern Europe to the Alps. As a result, European electricity prices are expected to remain high for several months to come.
The report indicates that if there is no significant increase in rainfall this year, the water shortage will lead to Europe relying more on fossil fuels during the winter months, while solar power generation will decline. Although the proportion of hydropower has been surpassed by solar and wind energy, hydropower still contributed more than 10% of the EU’s electricity supply last year.
Holland Banking Corporation's energy strategist Florence Schmidt said that the water levels in Italy, France, and Switzerland have dropped to several years of lows, indicating that hydroelectric power generation will be lower during the winter.
"The current drought problem is actually a future natural gas issue," she said. "If hydropower and nuclear power output are limited, the energy industry in the next few months will have to increase demand for natural gas."
Traders have begun to notice this supply gap. Austria and Italy, which rely heavily on hydropower, have higher electricity prices compared to Germany, where hydropower accounts for a lower proportion of energy production.
Data from the European Transmission System Operators' Association shows that water storage capacity in the NO2 region in southern Norway has reached its lowest level in over a decade. Water levels in some parts of Sweden, France, and northern Italy have dropped to their lowest point since 2022. Insufficient hydropower capacity in 2022 has further exacerbated the historic energy crisis caused by soaring natural gas prices.
Although this year’s price pressure is far less than what occurred after Russia’s military actions against Ukraine, the disruption in the supply of liquefied natural gas due to the blockade of the Hormuz Strait has pushed up the price of natural gas.
The Norwegian Water and Energy Agency issued a winter power supply safety alert on Wednesday. The agency noted that due to the drought in July, the water storage levels in the southern Norwegian reservoirs are low.
"We are currently unable to predict whether autumn will be rainy or dry." Norwegian Water Resources and Energy Authority head Kjert E. Lund said, "We must keep a sufficient water supply in reserve to meet winter power demands," while warning that electricity prices could rise substantially.
