European electricity prices have surged by more than 20% as a severe heatwave threatens to reduce nuclear power generation in France and wind power production in Germany.
French day-ahead electricity prices jumped 21.8% to €142.50 per megawatt-hour, while German prices rose 22.8% to €138.50/MWh, according to LSEG data.
France is expected to experience a significant reduction in nuclear power generation as high temperatures push river and water temperatures higher. French nuclear output is forecast to be constrained by about 7.3 gigawatts at midday on Wednesday, equivalent to around 12% of the country's total nuclear capacity.
Two French nuclear reactors are expected to shut down completely because of high water temperatures, while four others will operate under restrictions. Another reactor is also expected to remain offline because of low river levels.
French environmental regulations restrict the amount of heat nuclear plants can discharge into rivers, forcing operators to reduce output when water temperatures become too high.
At the same time, Germany is facing weaker wind generation. Wind output is expected to fall by 8.1 GW to 4.7 GW, around 60% below the seasonal average.
Lower wind generation means Germany may have to rely more heavily on gas-fired power plants to meet electricity demand. Gas generation has become more expensive amid continuing disruptions affecting energy markets and shipping through the Strait of Hormuz.
The heatwave is also expected to increase electricity demand as households and businesses use more fans and air-conditioning systems.
Temperatures in many parts of France are forecast to reach 35°C to 39°C on Thursday and Friday, before beginning to ease over the weekend.
Analysts warn that the combination of reduced nuclear and wind generation, higher electricity demand and rising gas costs could keep pressure on European power markets in the coming days.
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