Europe is facing an energy pandemic

Wolfgang Hansson 

 

Published: Today 16.22 

 

This is a commenting text. Analysis and positions are the writer's.

 

COLUMNISTS 

 

When everything becomes more expensive, it does not work to compensate people for the smallest increase in expenses. 

 

But the price explosion in electricity plays in a division of its own. 

 

Europe is facing a new pandemic-like situation where societal collapse threatens in many countries. 

 

The main reason is Vladimir Putin's way of using energy as a weapon combined with Europe's ambition to get rid of Russian gas dependence and at the same time carry out climate change. 

 

The electricity price increases expected this winter are system-threatening and risk playing into Putin's hands. 

 

Electricity market analysts have made forecasts that show that the price to heat a standard villa in the southern half of Sweden during the five winter months can rise by SEK 10,000 a month. Similar price increases threaten on the continent where the cold temperatures are not as many but electricity prices are even higher than here. 

 

Even for many electricity-intensive companies, this means extremely high costs that can make it impossible to continue the business. Companies are already warning that staff reductions are to be expected and, in the worst case, a series of bankruptcies. 

 

 

The electricity price increases expected this winter are systemic threats, writes Wolfgang Hansson. Photo: Johan Nilsson/TT

 

During the onset of the corona pandemic, politicians in most countries quickly realized that drastic measures were required to avoid a societal collapse. Enormous sums were invested in support for companies and employees. In retrospect, it turned out to be money well spent. Although in some cases the subsidies may have been too generous and fueled the increased demand which, after the pandemic, also contributed to inflation in general and high energy prices in particular. 

 

Acute threat to society 

 

Now the rulers finally seem to have understood that even the electricity crisis we are facing constitutes an acute threat to society. 

 

How many normal households can pay an extra SEK 10,000 a month for an item that is impossible to live without? Of course, we can save energy by lowering the indoor temperature and improving energy efficiency. It is possible to save a little on the margin. But the large cost cannot be helped. If there is an extra cold winter, the cost shines even more. 

 

If people are out of work, it will be even more difficult to pay their bills. Which could trigger a housing crash if panicked people are forced to sell their apartments and houses because they can't afford the combination of rising interest rates and skyrocketing electricity prices. 

 

If it becomes more expensive to drive an electric car, which is more expensive to purchase than a gasoline-powered car, an important part of the climate transition is threatened. 

 

 

Finance Minister Mikael Damberg, Prime Minister Magdalena Andersson and Energy and Digitization Minister Khashayar Farmanbar present electricity price support for households at a press meeting in Rosenbad on 17 August. Photo: Lars Schröder/TT

 

If we are lucky, the forecasts for the electricity price are excessively pessimistic. Maybe it won't be worse than last winter when electricity prices doubled or tripled. It all depends on how windy it is, how cold it gets and how much Putin ultimately turns on the gas valve. 

 

None of that we can influence. 

 

Therefore, it would be irresponsible of our politicians not to ensure that there is a ready plan for which electricity price level can be accepted and how a cost compensation to consumers and companies should be designed in the best way. 

 

They profit from the crisis 

 

But instead of arguing about who is the most generous, the parties should sit down together with experts and design the best solution. Just like they did during the pandemic. 

 

In Sweden, which is holding an election in less than a month, it is easy to perceive the parties' sudden interest in a price cap on electricity as election pork, which in a certain sense it is. But it is also a necessary measure. A number of other countries in Europe where there are no elections do the same. 

 

But, someone wonders, is there no reason for people to save on their electricity consumption? 

 

Yes, because the cost is likely to increase significantly even taking into account the compensation. 

 

While the consumers pocketbook make some rough money from the increased electricity prices. But it is not to Putin that the Swedes' electricity money goes. Nor in defense of Ukraine. 

 

The money goes largely to the Swedish state in the form of VAT, tax and transfer fees. For every penny the electricity price increases, the government's revenue also increases. The same applies in most EU countries. 

UN chief wants to see extra tax 

Other winners are energy companies such as Vattenfall and Fortum. 

The cost of producing a kilowatt hour of wind, hydro and nuclear power is more or less constant but the way electricity is priced gives them huge excess profits. 

It cannot be reasonable that the state and profit-making companies can pile up billions when the consequence is that the citizens are brought to their knees. Then we have a system error. 

We see a similar scenario when it comes to oil where, for example, the state-owned Saudi company Aramaco reported a profit increase of 90 percent for the last three months. Western-owned oil companies such as Exxon, BP and Shell also make multi-billion profits from ordinary consumers being forced to pay so much more for petrol and diesel. 

Western-owned oil companies make multi-billion profits from ordinary consumers being forced to pay more for petrol and diesel. Photo: Janerik Henriksson/TT 

The profits are so grotesque that UN chief Antonio Guterres recently called on the world's governments to introduce an extra tax on excess profits. He considers it immoral that the companies make money from the Ukrainian war. Britain is on the same track. 

Putin does not make more money from the electricity crisis in Europe because Russia supplies less gas and thus gets paid less. The reason why he still uses the energy weapon is another. 

He wants to destabilize Europe and create division between the countries. In this way, he hopes to break Europe's united front against Russia, where the EU contributes both large sums of money and advanced weapons to help Ukraine on the battlefield. 

Sacrifices 

One way to maintain this unity is to ensure that extreme electricity prices are not allowed to take full effect. That is precisely what Putin wants. 

If millions of ordinary Europeans are forced to freeze, sell their homes or lose their jobs, the pressure on their governments to stop supporting Ukraine will increase. Then Putin can more easily force a peace agreement that is in Russia's favor. 

Russian President Vladimir Putin. Photo: Pavel Golovkin / Ap 

It's good to be prepared for everyone having to make sacrifices because of Putin's war. To some extent, we all already do because of increased food prices and increased interest rates that are at least partly a result of the war. 

But the point of Western sanctions against Russia is to make it difficult for the Russian state to continue waging war. Not that we should create poverty and misery in our own communities.