Chapter 4
Energy prices and the impact of the energy crisis
Analysis of energy prices and the impact of subsidies in the context of the global energy crisis
The availability of abundant, reliable, affordable and clean energy is a key concern for policy makers and Global Sustainable Electricity Partnership (GSEP) members. Affordability must remain at the core of the decarbonisation of the energy sector at large, including power generation and the electrification of final sectors. The recent evolution of energy prices and the resulting 2022 energy crisis can be turned into an opportunity of transforming the system more rapidly if appropriate actions are taken urgently.
Energy prices started to soar during the second half of 2021 on the back of a strong recovery of energy demand following the end of most Covid‑19 pandemic restrictions and supply constraints (IEA, 2021b). This continued to escalate during 2022 (in particular in Europe) following the Russian invasion of Ukraine and the subsequent gas supply cuts. The resulting pressure on the liquefied natural gas (LNG) market caused gas prices to increase in many countries, and consequently an increase of electricity prices.
The magnitude of the increase of electricity, gas and oil products prices differed considerably across countries – in some cases by a factor 10 or more in 2022 – with additional local elements exacerbating or diminishing the pressure on energy prices. Concerns about competitiveness, affordability and energy security led several governments to put in place support measures to lower the impact of the energy crisis for end users. These trends and the impact of the support measures are analysed in this chapter.
Affordability must remain at the core of the decarbonisation of the energy sector at large.
In Chapter 3 and Chapter 5 of this report, the evolution of energy demand and of electrification indicators are reported for the period 2010‑2020, often providing an emphasis on the evolution of the last year – i.e. from 2019 to 2020.13 The time series of energy prices presented in this chapter cover the period 2010 to 2022, as energy price data are usually more readily available in national statistics. The year 2020 was an atypical year due to the impact of the Covid‑19 pandemic, and 2021 was split between the continued impact of confinements and the start of surging prices. For these reasons, to fully evaluate the impact of the energy crisis, the 2022 values are compared with the 2019 values, with all prices reported in real US dollars in 2019 currency.14
13 The choice of 2020 as last year for the electrification indicators is linked to the data availability of energy balances.14 The deflator for residential and industrial prices are based respectively on the International Monetary Fund’s consumer price index and producer price index.