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Higher energy prices to have larger effect in EBRD regions than in other economies

Oil&Gas Materials 28 September 2022 15:20 (UTC +04:00)
Higher energy prices to have larger effect in EBRD regions than in other economies
Laman Zeynalova
Laman Zeynalova
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BAKU, Azerbaijan, September 28. Higher electricity and energy prices will have a larger effect on households and firms in the regions of European Bank for Reconstruction and Development (EBRD) than in other economies at similar levels of development, Trend reports with reference to the Bank.

“Many economies in the EBRD regions are highly dependent on gas in their energy mix. While its role has come down over time, gas was still the single largest source of derived heat production in the EBRD regions in 2020, accounting for 37 percent of derived heat. In some economies, such as North Macedonia, Moldova and Ukraine, gas accounts for over three-quarters of derived heat production,” reads the latest report released by EBRD.

The Bank analysts note that high gas prices raise affordability concerns.

“Many households in the EBRD regions could not afford to adequately heat their homes already in 2016, when gas prices were much lower than in recent months. This was the case for almost 30 per cent of households in the poorest income decile, a much higher share than in advanced economies, such as Germany and Italy. Gas is less important for electricity production in the EBRD regions. Most electricity is produced from renewables (in particular hydro, with wind driving most of the increase in recent years), though fossil fuels remain more important in the EBRD regions than in advanced Europe. In some economies, such as Moldova, Greece, Latvia and Türkiye (as well as Italy and the Netherlands) gas is, however, also an important source for electricity production,” the report reads.

Electricity prices increased more in 2022 in countries where gas accounts for a larger share of electricity production.

“However, even where gas only accounts for a small share of electricity production (such as in Estonia), gas- or coal-powered plants are often the ‘marginal producers’ supplying reliable electricity needed to balance the grid and prices of electricity thus tend to co-move with gas prices. Electricity consumption per capita is high in the EBRD regions relative to other economies at similar levels of development. For instance, Bulgaria, Kazakhstan, Montenegro and Serbia stand out with much higher consumption than comparators with similar levels of GDP per capita. In some economies in the EBRD regions, such as those in Central Asia, some of the Western Balkans and Ukraine, energy intensity of GDP is also high relative to comparators.”

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