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The Global Energy Crisis
The Global Energy Crisis
illuminem
By illuminem
Oct 05 2022 · 5 min read

Illuminem Voices
Energy · Power & Utilities · Power Grid

Energy costs are increasing at an alarming rate worldwide, leaving people worrying about how they will afford to pay for heating and electricity bills in the winter

The geopolitical conflict with Russia, the consequent natural gas cuts, and the inflation has caused the wholesale prices of electricity to increase by 200% in Europe in the past year.

Electricity bills in Spain had a stable average of 50 EUR per kWh until the end of 2021, but in March 2022, the electricity prices skyrocketed to 545 EUR per kWh. Although the prices declined during summer, many households in Spain are spending excessive income on heating, cooling and electricity.

Similarly, due to the significant cuts on their natural gas supplies from Gazprom, the Russian-owned gas supplier, Italy raised concerns over the high price of gas provided by Dutch TTF, which anticipated month-ahead gas prices for September 2022 to reach 320 EUR/MWh.

However, the energy crisis is not only a European challenge but a global concern.

India and China are facing unexpected large-scale power cuts, and as a response, they are leaning on the carbon-heavy energy source: coal. As a result, both countries risk increasing their carbon emissions and backtracking their climate change mitigation ambitions to face the winter amid this fuel poverty.

Nevertheless, considering how the impacts of climate change on the energy infrastructure are progressively becoming dangerous. The increasing number and severity of extreme weather events such as heatwaves and hurricanes are testing the resilience of the power grids across continents.

In August 2022, when the temperatures in France passed  37ºC during the summer heatwave, the French energy provider EDF had to reduce output from their nuclear power plants. While this was necessary to ensure a safe cooling process of the nuclear plant, the French electricity grid struggled to meet the demand.

The striking results of Hurricane Fiona on Puerto Rico’s electricity grid are also distressing, leaving more than 100 thousand households still waiting for electricity two weeks after the disaster.

COVID-19 and The Cost-of-living Crisis

When the overlapping energy crisis worsened, many developing nations were already in the middle of a cost-of-living crisis. Families were already struggling to afford food and fuel due to the inflation after the pandemic, so they are now vulnerable to harsh winter conditions. Indeed, in June 2022, Tracking SDG 7 Committee's Energy Progress Report showed how COVID-19 slowed down the momentum of achieving universal energy access.

United Nations Secretary-General Antonio Guterres also noted his concerns for the developing countries still financially recovering from Covid-19 and the consequent cost-of-living crisis.

The Addressing the Cost of Living Crisis in Vulnerable Countries report by UNDP signalled the hotspots for the spikes in energy prices, including Albania, Mongolia and Armenia. The same report also warned about the severe impacts of recession-induced poverty in financially vulnerable and developing nations such as Yemen and Ethiopia.

Even in developed countries, households' lack of heating and electricity causes public health emergencies. For example, according to the public health provider of the UK, NHS, England “spends £1.3 billion each year to treat illnesses caused by cold homes”. Thus, if the energy crisis persists, it is expected to create a public health emergency with hidden costs for the developed countries and those that cannot afford such expenditures.

On the contrary, the combined profits of the energy companies almost reached $100 billion at the beginning of 2022. Mr Guterres criticised the oil and gas companies for earning and celebrating their "record profits". At the same time, many vulnerable communities suffer from energy poverty amid geopolitical conflicts and natural disasters.

Policy Interventions

To resolve these challenging times, the UN leader advised member states to apply windfall taxes on oil and gas companies to fund the rebate policies for vulnerable communities and the green energy transition in August 2022. He emphasised the need for a secure and resilient energy transition from fossil fuels to renewable alternatives while maintaining the energy democracy.

Thereupon, the member states are producing fiscal policies to ‘cushion’ the blow of the energy crisis. For example, EU governments, including Germany and France, are pledging to fund the payments of the households with the lowest income; others, such as Spain, recently announced emergency energy prices and profit caps to overcome the burden of lack of gas. Similarly, the UK pledged a generous $66 billion package to cap wholesale electricity and gas costs for domestic and business users for at least six months.

However, many hotspot nations for energy poverty do not have access to such funds to cap their energy markets. Hence, with the support of international organisations such as the UN and the IEA, there is an immediate need for international cooperation to ensure an equitable and quick energy transition.

References

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Bocca, R., 2022. How will the energy crisis affect you? Read the top stories of the week. World Economic Forum, [online] Available at: <https://www.weforum.org/agenda/2022/09/global-energy-sector-latest-news/>.

Carbonaro, G. and Huet, N., 2022. Energy bills are soaring in Europe. This is what countries are doing to help you pay them. Euronews, [online] Available at: <https://www.euronews.com/next/2022/09/21/energy-bills-are-soaring-in-europe-what-are-countries-doing-to-help-you-pay-them> .

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Euractiv, 2022. European governments splurging €500bn to cushion energy crisis: report. [online] Available at: <https://www.euractiv.com/section/energy/news/european-governments-splurging-e500bn-to-cushion-energy-crisis-report/> .

European Commission Press Corner, 2022. Questions and Answers on an emergency intervention to address high energy prices. [online] Available at: <https://ec.europa.eu/commission/presscorner/detail/en/QANDA_22_5490> .

Lawson, A., 2022. Study finds ‘hotspots’ in England and Wales at greatest risk from rising energy bills. Guardian, [online] Available at: <https://www.theguardian.com/money/2022/aug/22/uk-energy-crisis-hotspots-identify-areas-at-greatest-risk-from-rising-bills> .

Lowe, R. and Mahmood, H., 2022. Could the energy crisis cause a public health emergency?. NHS Confederation, [online] Available at: <https://www.nhsconfed.org/long-reads/could-energy-crisis-cause-public-health-emergency#c-table-of-contents__list-the-impact-on-the-health-and-social-care-system> .

Rankin, J., Milman, O. and Ni, V., 2022. Global energy crisis: how key countries are responding. Guardian, [online] Available at: <https://www.theguardian.com/business/2021/oct/12/global-energy-crisis-how-key-countries-are-responding> .

Reuters, 2022. France's EDF halts four nuclear reactors due to heatwave. [online] Available at: <https://www.reuters.com/article/uk-france-nuclearpower-weather-idUKKBN1KP0EV> .

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Sullivan, B., 2022. More than 100,000 clients in Puerto Rico are still without power 2 weeks after Fion. NPR, [online] Available at: <https://www.npr.org/2022/10/02/1126462352/puerto-rico-hurricane-fiona-luma-energy-power-outages> .

Tradingeconomics.com. 2022. France Electricity Price - 2022 Data - 2004-2021 Historical - 2023 Forecast - Quote. [online] Available at: <https://tradingeconomics.com/france/electricity-price#:~:text=Electricity%20Price%20in%20France%20averaged,data%20for%20France%20Electricity%20Price.> .

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World Economic Forum, 2022. Nord Stream and emergency measures: What to know about the global energy crisis this week. [online] Available at: <http://Nord Stream and emergency measures: What to know about the global energy crisis this week>.


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