LONDON: Energy prices in Europe are repeatedly breaking records even before winter really kicks in, and one of the most damaging cost crunches in history is about to get worse as the temperature starts to drop.

       A super price spike in the United Kingdom last month forced some industrial companies to cut production and seek state aid, a harbinger for what could play out widely in Europe just as it contends with a resurgence of the coronavirus.

       For governments, it could mean tension with neighbouring countries by moving to protect supplies. For households, it could mean being asked to use less energy or even plan for rolling blackouts.

       The trouble is that any fix is unlikely to come from the supply side any time soon, with exporters Russia piping only what it has to and Qatar saying it’s producing what it can.

       The energy industry is instead faced with relying on “demand destruction,” said Fabian Roenningen, an analyst at Rysted Energy.

       “We have seen it over the last couple of months already, and in many industries, it will most likely continue and even increase,” he said from Oslo. “It’s just not profitable to operate for a lot of the players in the current market conditions.”

       The outlook adds to the sense of foreboding in Europe. The region is back at the epicenter of the pandemic again with Covid-19 cases surging and fears about a new variant identified in South Africa swirling the globe.

       Restrictions are being tightened in some countries, while household budgets are being squeezed by rampant inflation. On top of that, freezing weather could mean the lights going out. A return to lockdown like in Austria would help curb power demand, though few governments want to do that.

       France, Europe’s second biggest economy, is particularly at risk. The possibility of a chill in January and February is causing concern for the nation’s grid operator. Availability at nuclear stations, the workhorse of the French power system, is low after the pandemic delayed the maintenance of some reactors, according to a report on Nov 22.

       Power prices there are the highest since 2012 as a cold blast creeps into France and is expected to take hold when workday demand starts to rise.

       Last winter, the grid operator appealed to households to use less energy at peak times and activated some demand reduction contracts with manufacturers when things got really tight. The next step would be to reduce voltage across the network and then rolling blackouts of two hours per region as a last resort. All that would come ahead of a presidential election.

       “If there’s a deep cold snap and there’s no wind, things could become tight given the lesser availability of nuclear plants and the recent closure of dispatchable generation assets using coal,” said Nicolas Goldberg, a senior manager in charge of energy at Colombus Consulting in Paris. “If it’s getting really cold and there’s no wind, it may become a problem.”

       France is also a key exporter of electricity to neighbouring countries, meaning that the effects of a crisis would reverberate in Germany, Spain, Italy and Britain. Maximum demand is expected to be 80.7 gigawatts. ―Bloomberg