Natural gas prices in Switzerland explode amid supply shortage

Natural gas prices in Switzerland have “exploded”, after a lack of supply and increased demand caused the cost to increase dramatically. With Switzerland producing no natural gas domestically, energy companies are concerned costs will continue to rise.

Natural gas prices in Europe highest since 2018

Average prices for natural gas peaked at over 70 euros per megawatt-hour earlier this month. The rise was a dramatic increase from prices in June 2020, which saw a low of 3 euros per megawatt-hour due to coronavirus lockdowns across the continent. Although gas is not used to generate electricity in Switzerland, it can power other utilities, such as restaurant grills and heating in housing.

Head of Fundamental Analysis for Axpo Holding, Andy Sommer, said increased demand and reduced supply have forced prices to rise to levels only seen during “extraordinary cold spells,” such as in 2018. Watson reported that Switzerland has to rely on other countries for its gas supply, with 60 percent coming from the EU and over a third from Russia. 

Switzerland relies on Europe and Russia for natural gas supply

Swiss energy companies are also concerned that delays in improving Europe's gas supply are exacerbating problems, with the power company for Canton Bern, BKW, citing concerns over German hesitancy to approve the new Nord Stream 2 gas pipeline. They state that a combination of maintenance work in Norway, less gas from Russia, less wind power and increased demand from China is causing prices to spike.

Although consumers may see increased prices, there is no concern of a power shortage in Switzerland. BKW has confirmed that gas outages would not affect the power grid, and other European countries can always resort to other means of generating electricity, such as coal. Andy Sommer confirmed that if the weather in Switzerland remains stable, there is little chance of another price spike.