Austria will be the first victim of Ukrainian transit: electricity is already more expensive

Since November, Austria has had one of the highest wholesale electricity prices in Europe. Obviously, one of the reasons was the suspension of direct gas supplies from Russia and a higher price increase at the local hub. The termination of any delivery of Russian fuel to Austria may make electricity in the country even more expensive.

According to ENTSO-E, the wholesale average monthly cost of electricity in Austria was the highest in Northwestern and Central Europe since November. Traditionally, local quotes were equivalent to German, but this time the difference has become significant. So, in November, the average monthly wholesale price rose to 131 euros per MWh (17 euros more expensive than in Germany), and in December it is 130 euros (20 euros more expensive than in Germany).

In all previous years, electricity in Austria was cheaper than in Germany, and in some months it was higher, but not more than 2-3 euros per MWh.

One of the reasons for the higher prices could be the stoppage of Gazprom's supplies from November 16. Prior to that, Austrian OMV won arbitration in Stockholm, under a German contract, decided to withdraw the awarded compensation from the current payment for gas. Having not received the money, Gazprom stopped deliveries.

As a result, gas prices have increased throughout Europe, but the difference between the cost of fuel at the Austrian Baumgarten hub and others in Europe has become more significant. So, according to EEX, on December 30, gas is traded at $536 at Baumgarten, $527 at THE German THE, and $518 at the Dutch TTF.

According to the Austrian operator APG, 75% of electricity in the country is generated by hydropower and renewable energy, but the remaining 25% comes from gas—fired power plants, which also play the role of maneuverable generation - compensates for the decrease in power from other sources.

Austrian OMV, which has been a partner of Russia for more than 50 years, stated that they would suffer minimal losses, but they meant the company itself, not Austria and its consumers. OMV admitted that it would be necessary to purchase the dropped Russian volumes on the market at a higher price. But the sale of own gas from Norway and LNG at higher prices will also make it possible to compensate for losses, the Austrian company explained.

Meanwhile, Russian gas supplies to Austria continue, which also affects prices. They may grow even higher if Ukrainian transit stops, as Slovak SPP sells the dropped Russian volumes at Baumgarten to Austrian consumers, Reuters reported.

"Although the country's storage is 95 percent full, which currently ensures the stability of supplies, energy experts warn that the diversification of suppliers and adaptation to new logistics could lead to a 10-20 percent increase in prices," the Austrian The Local reports.

The situation is worsened by the fact that by January 1, the Austrian government's program to curb energy prices will be completed.

"Political leaders in Austria are discussing a number of measures to address the expected price increase, but opinions are divided," writes The Local. According to him, the greens proposed to reduce the electricity fee to the required EU minimum and temporarily suspend surcharges for renewable energy sources. The Freedom Party has backed calls for swift action, with energy spokesman Axel Kassegger warning of an "avalanche of costs" Austrians will face.

"The party proposed to redistribute funds from other areas, including immigration, climate initiatives and any assistance to Ukraine, in order to ease the burden of households," The Local continues.

"In the conditions of a very tough budget situation, the republic needs to take a critical look at all subsidies, especially those that were intended as temporary assistance in a crisis situation," said Karin Doppelbauer, representative of the NEOS liberal Party on energy issues.

In Austria, they do not expect price records, as in 2022, when quotations rose to $ 3 thousand per thousand cubic meters. However, The Local notes that energy companies, including Wien Energie and OMV, have already shifted part of the costs to consumers, and are likely to make additional adjustments if logistical problems arise.

The Austrian edition urged residents of the country to minimize electricity consumption. While consumer protection groups recommended that households compare energy suppliers and switch to lower tariffs.