The 2023 edition of the energy prices and costs report, covering developments between 2020 and 2022, comes at a time of almost unprecedented upheavals in European and global energy markets; a time of great international economic and political instability. The changes brought by the energy transition were already having a profound impact on energy markets, which were hit by two major crises in succession. First, the Covid-19 pandemic in 2020 led to a sudden sharp reduction in energy demand and energy prices, as worldwide lockdown restrictions led to decreasing household consumption and industrial production. The gradual reopening of society in 2021 and the fast recovery of demand led to significant energy price increases - to higher price levels than ever seen before. The seeds of the second of these shocks, the gas supply crisis, were planted already in the summer of 2021. This was the time when Russian state-owned Gazprom did not refill its gas storages in Western Europe and refused to offer additional natural gas supplies on the European spot markets. The crisis was further amplified by Russia’s preparations for and the eventual start of the invasion of Ukraine in February 2022. Sanctions and countersanctions led to a sudden drop in Russian gas supplies to the EU, which could not be compensated in time with additional pipeline or LNG gas or other fuels. The confluence of these economic and geopolitical factors have driven European gas and electricity prices to peaks no one could have predicted before, with serious implications for European households, industry, the broader economy and public finances. Neither of these shocks could have been predicted at the time of the last report2. Together, these have focused an unprecedented level of attention on various aspects of energy policy, most importantly on security of supply, the competitiveness of European industry, the survival of small and medium enterprises (SMEs), and the affordability of energy for European households.
