A TRIPLE SHOCK: GEOSTRATEGIC,
ENERGY AND INFLATIONARY
A GLOBAL ECONOMY WEAKENED
BY THE WAR IN UKRAINE
The economic recovery following the
gradual end of the Covid-19 pandemic
was accompanied by massive stimulus
packages. This situation caused a
bottleneck in supply chains and a surge
in the price of commodities, including
energy. Russia’s invasion of Ukraine in
February 2022 exacerbated these price
pressures because of the severe supply
disruptions it caused, especially for the
raw materials produced by these two
countries. Stoked by this unprecedented
energy crisis, global inflation (8.8%
(1)
)
has led to a tightening of monetary
policy in most major economies
and a slowdown in global growth.
EXCEPTIONAL EUROPEAN MEASURES
The significant European exposure to
Russian gas (40% of consumption in
2021) caused gas prices – and therefore
electricity prices – to soar. This was
exacerbated by the reduced availability
of the nuclear fleet in France and the
unfavorable hydrological conditions.
Europe therefore had to find short-term
alternatives to maintain security of
supply. This resulted in an increase in
LNG imports – up by 45 billion m
3
from
2021
(2)
– and led to more than 90%
(2)
of gas storage being filled. It has also
resulted in many countries temporarily
restarting their coalfired power plants
European governments have taken
steps to protect the purchasing
power of businesses and consumers
with energy vouchers price shields
a reduction in VAT and even a
windfall tax
The European Commission has also
introduced a temporary electricity price
cap of 180MWh on the revenue of
The robust economic recovery linked to the end of the pandemic in 2021, together with Russia’s
invasion of Ukraine, have created an unprecedented global energy and inflationary shock.
These crises underscore the need to accelerate the energy transition amid new challenges.
ELECTRICITY SPOT PRICE* IN FRANCE IN 2022 (€ / MWh)
800
600
300
700
Jan.April August Feb.May Sept.March July June Oct.Nov.Dec.
500
400
200
100
0
Average 2021 France Spot Average 2020 France
* baseload power
price day-ahead
1 Source IMF
2 World Energy Outlook 2022 International Energy Agency p 91
producers of renewable and nuclear
energy (so-called “inframarginal”
producers) to partially finance these
measures. Member States were allowed
some freedom in implementing this
decision.
In Belgium, for example, a cap of
€130 / MWh was introduced from
August 1, 2022 until June 30, 2023.
In France, the 2023 Finance Act
provides for the introduction of a cap
on all electricity production exposed
to market prices over a retroactive
and extended period In Italy the
government has already adopted an
extraordinary solidarity contribution
for companies in the energy sector
Despite this support some energy
intensive companies have been
forced to scale back or even cease
their operations
“With the 2022
REPowerEU
plan,
the European Union aims to
reduce its energy dependence on
Russia through energy savings,
green energy production and
diversification of supplies.”
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