How Europeans are responding to exorbitant gas and power bills

Brussels, Belgium Updated: Feb 21, 2022, 11:24 PM(IST)

A general view shows solar panels used to produce renewable energy at the photovoltaic park during its official inauguration in Cestas, southwestern France Photograph:( Reuters )

Story highlights

Lives and livelihoods across the continent are being upended by a series of factors, including pandemic-induced supply shortages and now geopolitical tensions that are driving some energy prices up fivefold

A German retiree facing sky-high energy bills is turning to a wood-burning stove. The owner of a dry cleaning business in Spain adjusted her employees’ work shifts to cut electric bills and installed solar panels. A mayor in France said he ordered a hiring freeze because rising electrical bills threaten a financial “catastrophe.”

Europeans have long paid some of the world’s highest prices for energy, but no one can remember a winter like this one. Lives and livelihoods across the continent are being upended by a series of factors, including pandemic-induced supply shortages and now geopolitical tensions that are driving some energy prices up fivefold.

Matters could get worse if tensions between Russia and Ukraine escalate further, potentially interrupting the flow of gas. Russia provides more than one-third of Europe’s natural gas, which heats homes, generates electricity and powers factories. Even as politicians and leaders in capitals across Europe are freezing prices, slashing taxes on energy and issuing checks to households hardest hit by the price increases, concerns are growing about what the persistently high prices could mean for peoples’ jobs and their ability to pay their bills.

“People are very upset and very distressed,” said Stefanie Siegert, who counsels consumers in the eastern German state of Saxony who find themselves struggling to pay their gas and power bills.

Germany has so far not seen protests over exorbitant energy bills like those that filled streets in Spain last year, or an explosive outcry over inequality on the level of the yellow vest movement that rocked France in 2018. But Siegert, whose agency counseled more than 300 customers in January — three times its monthly average — said she wouldn’t be surprised if the anger directed at the prospect of a vaccine mandate shifted its sights to energy prices.

“When you talk with people, you feel their anger,” she said. “It is very depressing.”

Charged in one month what he used to pay in a year

Henry Backhaus, 65, is among tens of thousands of Germans who were dropped by private energy companies that could not afford to buy wholesale electricity and gas at soaring rates. Under German law, the local utility was then required to step in, but it sent him a bill for 747 euros (nearly $850) a month — more than he had been paying for an entire year.

“I am a retiree,” he said, looking over the stack of paperwork spread out on his dining room table. “That is more than what I can afford.”

But Backhaus, who lives in a three-story house in Saxony, has an alternative that might make him the envy of the millions of other Germans stuck with high energy bills: He has a large wood stove in his living room and, in his basement next to his gas-fired furnace, a furnace that burns coal or wood.

The stove and furnace, installed before the house was connected to a gas main, allow him to turn down the dial on his radiators to just 18 degrees Celsius, or 64 Fahrenheit, essentially cutting his gas bill in half.

“I still have a reserve of coal briquettes and stacks of dried wood,” he said, poking another log into the stove. “But this is only temporary. It is not a long-term solution.”

Most people don’t have the option of burning wood or coal, relying instead on piling on layers of clothing. In Britain, the government’s price cap on energy bills was recently raised 54%, increasing annual charges to 1,971 pounds. That increase will affect 22 million households beginning in April, contributing to broadening worries in Britain about the rising cost of living.

Similar concerns can be found throughout the continent.

Athina Sirogianni, 46, a freelance translator in Athens, Greece, said she remembered fondly the day about a decade ago when her building switched from oil to natural gas. The move cut her utility bill in half.

Now, her heating bill is nearly triple last year’s.

“I keep trying to think of where I can cut spending so I can afford the bills,” she said, adding that she hasn’t visited the hairdresser in nearly a year, and has pared back her food shopping to the essentials.

‘The more we produce, the more we lose’

The price of energy is also forcing shutdowns or slowing production at manufacturers across Europe, even as they are eager to fill a backlog of orders and resume levels of business from before the pandemic.

The smelting industry has been especially hit hard. Nyrstar, the world’s second-largest zinc processor, produces nearly 500 tons of the metal each day at a sprawling factory in Auby, in northern France, a complex that consumes as much energy as the French city of Lyon.

When its electrical rates surged from 35 euros to 50 euros per megawatt-hour to 400 euros in December, it made no sense to keep the factory running, said Xavier Constant, Nyrstar France’s general manager. At that rate, he said, “the more we produce, the more we lose,” and so the plant shut down last month for three weeks.

Nyrstar temporarily halved production at its other European plants in October when the energy crisis set in, prompting a brief spike in the global price of zinc.

Last fall, fertilizer plants in Britain were forced to close because of gas prices. And several German companies that produce glass, steel and fertilizer have also scaled back production in recent months.

To ease the burden of the high prices, the government in Berlin reduced by half an energy surcharge on bills aimed at funding the country’s transition to renewable sources of power, and plans to phase it out by the end of next year.

But industry leaders say that is not soon enough. Almost two-thirds of the 28,000 companies surveyed by the Association of German Chambers of Commerce and Industry this month rated energy prices as one of their biggest business risks. For those in the industrial sector, the figure was as high as 85%.

Small businesses, too, are scrambling for ways to cut costs.

Pilar Ballesteros Parra, who co-owns Ronsel, a dry cleaning business in Madrid that employs 10 people, said that her company’s electricity rates had risen about 20% from the previous year. In reaction, she has reorganized her employees’ work schedule, starting the early shift earlier and pushing the late shift further into the evening so the dry-cleaning equipment can run when rates are lowest.

She is also installing solar panels on the company’s building, outside of the Spanish capital, so that Ronsel can generate at least 60% of its own energy. The government is helping her with a 35% subsidy of the $45,000 investment.

“Our building faces southwest and gets a lot of sun, so that means that we should be almost self-sustainable during the coming months of spring and summer, which will be a big relief,” she said.

Still, she said, the energy crunch and overall price inflation meant that she saw little chance of sparing her customers some of the burden.

“There’s clearly this electricity headache, but there’s also now wage inflation and much higher gas bills for our vans,” she said. “In a few months, it’s clear that some of these costs will have to be passed on to our clients if we want to keep going.”

For public budgets, ‘like riding a roller coaster’

A broad range of public institutions are facing strains from higher power bills. In Poland, hospitals that have already been financially stretched by the coronavirus pandemic now question if they can keep their doors open.

“Managing a hospital in Poland is more and more like riding a roller coaster,” Robert Suroweic, who manages the Provincial Hospital in Gorzow, said on Twitter. He said the facility’s electricity prices had increased 100%.

He and other hospital directors have appealed to the government in Warsaw to intervene, saying the recent cuts to taxes on energy and gasoline were not enough.

In Germany, there is rising tension in municipally owned utilities that must accept customers, like Backhaus in Saxony, whose relatively low-cost contracts have been dropped by private energy companies because the companies can’t pay ballooning energy rates.

The municipal utilities are forced to increase the rates for these new customers, often almost astronomically high, to cover the cost of buying extra energy on the spot market at record prices. That leads to tensions in communities, and can threaten municipal finances.

“Anyone who wants to will be supplied with energy by the municipal utilities,” said Markus Lewe, president of the German Association of Cities and Towns. “But it must not lead to the municipal utilities and their loyal customers being asked to pay for questionable business models of other providers and having to answer for their shortsighted financing.”

He called on the federal government to intervene, to protect cities from the price instability.

In France, local leaders are also looking to the federal government to help ease the sting of skyrocketing energy bills.

Boris Ravignon, the mayor of Charleville-Mézières, said his city is facing “a catastrophe” after its January energy bill more than tripled, wiping out the region’s budget surplus for infrastructure and public services in a single month. The city is trying to cut costs by switching streetlights to LED bulbs, which use less electricity, and has proposed a new hydroelectric project.

The mayor has already frozen planned hirings and said the city may have no choice but to raise the cost of public services like water, transportation, fees to use sports halls like the city’s public pool, and cultural events.

“We really want to protect citizens from these increases,” Ravignon said. “But when prices reach such crazy heights, it’s impossible.”
 

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