(Bloomberg) -- The surge in Europe’s gas and electricity costs threatens a cold, expensive winter for the continent, as government efforts to protect citizens look no match for the scale of the crisis.
A handful of governments have pledged about 10 billion euros ($11.6 billion) so far in subsidies and other assistance for consumers struggling with the unprecedented cost hikes. But that’s dwarfed by the 100 billion euros in additional energy bills faced by customers in the European Union this winter, according to Greek government and analyst estimates.
Much larger government intervention -- and possibly mild temperatures -- will be needed to avoid tens of millions of families across the continent bearing the brunt of price increases estimated to run into several hundred euros per household.
EU citizens are “unable to cover their energy costs resulting in an immediate increase in energy poverty,” the Greek finance and environment ministers said in an Oct. 2 letter to the euro-zone’s finance chief. “The additional energy cost to be incurred by consumers is likely to reach 100 billion euros.”
Simone Tagliapietra, a senior fellow at the Bruegel think-tank in Brussels, who focuses on energy policy, also put the total increase in consumer costs across the EU at as much as 100 billion euros this winter.
The continent is reeling from record gas and electricity prices caused by constrained natural gas imports from Russia, a lack of storage and tight supply-and-demand dynamics as the region revives after lockdown.
“These prices could dent the European recovery,” said Tagliapietra.
Political Response
Political leaders are acutely aware of the impact the energy crisis is having on their citizens.
- In France, President Emmanuel Macron’s government is providing “energy check” subsidies worth 580 million euros to the poorest households, on top of a gas price ceiling that will cost more than 4 billion euros.
- Italy put in place a package of more than 3 billion euros to curb price increases in the last quarter of the year, though electricity bills were still set to increase about 30% starting this month.
- Spain is channeling about 2.6 billion euros from windfall taxes on energy firms to consumers.
- In Belgium, energy regulator Creg recently said that combined annual gas and electricity bills were, as of last month, set to rise by more than 700 euros per household.
- The U.K., no longer an EU member, announced 500 million pounds ($680 million) of measures to help the poorest households. Still, the country’s energy bill price cap is expected to rise 30% to about 1,660 pounds per year in April, according to analysts Cornwall Insight Ltd.
Next week, the EU will set out recommendations on further measures available to member states, a move designed to help more governments come up with emergency support for consumers and businesses.
More steps are needed because, even with the support announced so far, 70 million to 90 million households may struggle to meet their energy costs, according to Stefan Bouzarovski, a professor at the University of Manchester who specializes in energy consumption.
“The question depends on what happens to the weather,” said Angela Wilkinson, secretary general of the World Energy Council in London. “If it snaps, the resilience of households to afford big swings in energy prices is pretty non-existent across Europe.”
©2021 Bloomberg L.P.
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