Energy prices will rise by year-end, but analysts do not expect a sharp increase

Energy prices on the market will most likely rise over the rest of the year, according to analysts. The main risk is gas, whose price is being adversely affected by the slow replenishment of storage facilities in Europe and uncertainty in the Middle East. However, households need not fear a sharp increase, as suppliers will gradually raise prices, particularly for fixed-price contracts. Winter will be key to longer-term price developments. This follows from analysts' comments to ČTK.

According to XTB analyst Jiří Tyleček, the baseline scenario for energy market developments over the remainder of this year and at the start of next year is rising electricity and gas prices. "Wholesale gas and electricity prices are significantly higher than a year ago, and Europe is entering autumn with low gas inventories, limited output from some power plants and uncertainty over LNG supplies through the Strait of Hormuz," Tyleček explained.

Electree co-founder Lubomír Káňa expects a period of relatively higher and, above all, significantly more volatile energy prices on the market through the end of the year. In his view, the biggest risk is developments in the gas market. "Europe is entering the second half of the year with storage facilities filled below average levels, while also being heavily dependent on the global LNG market," Káňa said. Current prices of around 60 euros (CZK 1,450) per megawatt-hour (MWh) therefore include a fairly significant geopolitical premium, he said.

According to Káňa, gas prices will also affect electricity prices. In more expensive hours, electricity prices are still significantly determined by gas-fired generation. "The price of emissions allowances and the growing influence of weather are also factors – generation from wind, photovoltaics and water, as well as the availability of French nuclear power plants," Káňa added.

However, analysts do not expect a sharp increase in prices. "Suppliers purchase energy gradually, and a large proportion of customers have fixed prices. Moreover, the rise in exchange prices is not extreme. However, the turnaround in the wholesale market will begin to be reflected in new offers," Tyleček said. He expects a more noticeable increase in gas prices, with the total bill potentially rising by between 10 and 20 percent under the baseline scenario.

According to Bidli analyst Petr Špirit, consumers can also expect greater market stability than in the past, but not a return to cheap energy. "Final consumer prices will depend not only on developments in exchange prices for gas and electricity, but also on regulated charges, distribution costs and suppliers' commercial policies. Companies will continue to focus primarily on price predictability, because stable energy costs are crucial for investment and industrial competitiveness," he described the situation.

In his view, geopolitics remains the biggest risk on the energy market. "Anyone whose fixed-price contract is ending should address it now and look beyond just one year," Špirit added.

According to Greenbuddies chief economist Tomáš Krejčí, the coming winter will be decisive for longer-term developments. "European demand will remain at last year's level only if winter is two degrees warmer than average. That has happened twice in the past 25 years. Strong El Niño, confirmed by the US NOAA (National Oceanic and Atmospheric Administration) in mid-August, typically brings a colder first quarter," Krejčí said.

Prices of European benchmark gas purchase contracts rose by tens of percent after the start of the war in the Middle East. The conflict began on the last day of February with a US-Israeli attack on Iran. Gas also acts as the so-called marginal source in electricity generation in Europe. As gas prices rose, electricity also gradually became more expensive on the market. Despite the current easing of the situation in the Middle East, energy prices on the market remain higher than before the conflict.