Europe is heading into winter under a growing energy cloud, as a fresh surge in natural gas prices increasingly feeds through to electricity markets.

Recent developments have heightened concerns over the costs households and businesses will face in the coming months, with the war in Iran once again placing geopolitical risk at the centre of global energy markets.

The biggest impact is now expected to be felt in electricity bills, particularly among consumers on variable-rate green and yellow tariffs. The sustained rise in wholesale electricity prices is creating an increasingly unfavourable environment for retail charges in the months ahead, while consumers are running out of opportunities to lock in lower rates before a potentially difficult winter.

Under the current arrangements, the fixed-rate offer from Public Power Corporation (PPC), Greece’s largest electricity supplier, is due to expire at the end of October. The blue fixed-rate tariff currently costs 11.5 cents per kilowatt-hour (kWh), with a monthly standing charge of €3.50. No announcement has yet been made on whether the offer will be extended or replaced by a comparable product.

Unless that happens, consumers will lose the cheapest fixed-rate option offering protection against wholesale market fluctuations at a time of considerable uncertainty.

The first warning signs have already emerged in the natural gas market. On Tuesday, international prices briefly reached €90 per megawatt-hour (MWh) during trading before retreating to close at €86.20/MWh, remaining almost three times higher than before the outbreak of the war in Iran.

The retreat from the day’s highs does not, for now, appear to indicate a change in direction. The correction in both gas and oil prices followed unconfirmed reports of a fresh mediation initiative by Qatar and Pakistan aimed at restarting negotiations to end the conflict.

Markets, however, continue to anticipate a difficult winter. Europe faces the combined challenge of restricted supplies from the Middle East and gas storage facilities that are only 75% full, among the lowest levels for this time of year.

The situation is even more concerning in Germany, Europe’s largest economy, where gas storage levels stand at just over 61%.

Gas heating bills also under pressure

Soaring international prices threaten not only to increase the cost of generating electricity but also to directly affect consumers who rely on natural gas for heating, creating a second source of financial pressure for households and businesses ahead of winter.

While international fuel prices present the most immediate risk, additional costs could emerge from 2027 through higher gas distribution network charges.

Under Enaon EDA’s new development programme for 2027–2031, currently undergoing public consultation by Greece’s Regulatory Authority for Waste, Energy and Water (RAAEY), the company is proposing an increase in network usage fees.

According to the proposal submitted by the Italian owners, Italgas, the average network charge for residential and commercial customers would rise to €19.86/MWh from €18.58/MWh under the previous programme, an increase of approximately 6.9%.

For 2027, the average charge in Attica is projected at €13/MWh with the planned investments, compared with €11.90/MWh without them.

In Thessaloniki, the corresponding figures are €10.54/MWh and €9.39/MWh, while in Thessaly they are €7.40/MWh and €6.52/MWh respectively.

Across the rest of Greece, the difference is marginal, at €6.53/MWh compared with €6.52/MWh.

Wholesale electricity prices climb from €110 to €173/MWh

The impact of expensive natural gas extends well beyond households and businesses using the fuel directly.

It also feeds into electricity markets, and the connection is particularly strong in Greece, where gas remains a major source of power generation.

When gas-fired power stations determine the marginal price — the wholesale market clearing price — increases in the cost of fuel are passed through to the wider electricity market.

That impact is already clearly visible.

The average wholesale electricity price, which stood at approximately €110/MWh in July, rose to €133.40/MWh in August and €156.31/MWh in September. So far in October, it has been hovering around €173/MWh.

Beyond the increase in average prices, the market is also experiencing sharp fluctuations within individual trading days.

Today’s maximum price exceeds €335/MWh, although that is down from €406/MWh on Monday. Even the day’s lowest price stands at €121/MWh.

The figures illustrate a market that is not simply operating at higher average prices but is also experiencing exceptionally expensive peak-demand periods.

A comparison with the beginning of the summer makes the scale of the change even clearer.

Since July, average wholesale electricity costs have increased by approximately 57%.

The rise has been sustained, with month-on-month increases of 21.3% in August, 17.2% in September and, based on the figures available so far, 10.6% in October.

What this means for household electricity bills

Higher wholesale electricity prices do not translate directly or immediately into equivalent increases in consumer bills.

They are, however, a key factor in determining variable-rate tariffs, and the longer elevated wholesale prices persist, the greater the likelihood that they will be reflected in retail charges.

For a household consuming 400 kWh per month, every additional cent per kWh adds €4 to the monthly cost of electricity consumption.

If the difference between two tariffs reaches five cents per kWh, the additional cost amounts to €20 a month or €240 a year, excluding standing charges and other fees.

This makes comparing available electricity tariffs increasingly important as winter approaches.

The price per kilowatt-hour is not the only consideration. Standing charges, discounts for paying bills on time, contract duration and potential early termination fees all contribute to the actual cost of a tariff.

With fixed-rate products becoming more attractive, consumers are effectively paying for the predictability that comes with securing a set price during a period of significant market volatility.

Natural gas returns to the forefront

The extent of Greece’s exposure to international gas prices is also evident in the country’s electricity generation mix.

For Wednesday, 21 October, natural gas accounts for 40.95% of electricity generation, exceeding the contribution from renewable energy sources, which stands at 39.31%.

Together with lignite, which contributes 7.41%, thermal power generation accounts for 48.36% of the country’s electricity mix — almost half of total production.

These figures are particularly significant at a time when natural gas prices have more than doubled compared with their pre-war levels and the fuel continues to play a decisive role in determining electricity prices.

Europe’s winter battle for LNG supplies

Europe’s biggest challenge is now shifting towards securing the liquefied natural gas (LNG) shipments it will need over the coming months.

As temperatures fall, European buyers will have to compete with Asian markets for available supplies and may be forced to offer higher prices to attract cargoes.

LNG prices in Asia have already climbed to their highest levels since 2022.

Europe has limited room for manoeuvre.

Mild weather during October has so far provided some relief, containing demand and allowing gas stocks to be replenished more quickly.

But the balance could shift rapidly if temperatures drop, particularly while supplies from the Persian Gulf remain disrupted.

The region accounted for approximately one-fifth of global LNG supplies last year.

Maritime security is another major concern.

Attacks on oil and gas carriers have intensified uncertainty, while Tehran’s warning that it has “no choice” but to seek control of the strategically vital Strait of Hormuz continues to keep geopolitical risk premiums elevated across energy markets.

Deputy energy minister: Balkan electricity prices even higher

Deputy Energy Minister Nikos Tsafos also addressed rising prices on Tuesday while responding to a question in parliament.

He noted that Greece’s average wholesale electricity price for October currently stands at approximately €173/MWh, stressing that price pressures are even greater in several neighbouring markets.

According to the figures he presented, the corresponding price in Bulgaria is €214/MWh, while Hungary’s stands at €229/MWh.

In France, despite the country’s extensive nuclear power generation capacity, the average price is €168/MWh.

The comparison shows that Greece is not an isolated case but part of a wider regional rise in electricity prices.

However, this does little to change the central problem facing the country as it enters winter: wholesale electricity prices have already climbed by around 57% since July, while natural gas remains substantially more expensive than before the war.

The crucial question now is how long the crisis will last and how much of the increase will eventually reach household and business energy bills.

A cold winter, prolonged disruption to supplies from the Middle East and intensified competition between Europe and Asia for LNG are the three factors that could quickly upset the already fragile balance in energy markets.