Europe's unprecedented heatwaves this summer have led to record low water levels in major rivers, significantly impacting power generation, goods transportation, and company earnings. This widespread issue is affecting the entire European landscape, not just isolated regions, and highlights the need to reconsider business practices in the face of climate change.
Nuclear power plants, which typically provide around 23% of the EU's electricity, are particularly affected as they rely on river water for cooling. Environmental rules limit the temperature of water returned to rivers, forcing plants to reduce output when water temperatures rise. French nuclear plants, which are the largest in Europe and usually export power, have experienced significant reductions in generation. For example, the Golfech 2 reactor will be offline for a week, and the Tricastin plant may reduce output due to high Rhone River temperatures. Earlier heatwaves in June and July resulted in the largest heat-related losses of French nuclear generation in at least a decade. Similarly, the Paks nuclear power plant in Hungary, which generates nearly half of the country's electricity, faces a potential shutdown for weeks due to critically low Danube River levels. Romania's Nuclearelectrica also had to shut down one reactor, with another expected to follow.
The drought conditions are also curtailing hydropower output. Austrian utility Verbund, which produces about 85% of its electricity from hydropower, saw its earnings reduced by approximately €370 million in the first half of the year compared to normal hydrological conditions. Serbia's largest hydropower plant, Djerdap 1, is operating at only 20% capacity. Low water levels are also disrupting cooling systems at Serbia's Kostolac coal-fired power plants, leading to reduced output. Gas-fired power stations have also seen output reductions due to high temperatures, with some experiencing a 7-12% decrease on a 30°C day.
The reduced power output combined with increased demand for air conditioning has driven up electricity prices. German power prices for 8 p.m. on Wednesday climbed to €263.65 per megawatt-hour, the highest for that time since mid-July. French power prices also rose to levels last seen during an earlier period of extreme heat. While traders expect price spikes, they are not anticipated to be as severe as the previous heatwave due to fewer restrictions on French nuclear plants and relatively high wind generation. However, the overall impact on company earnings is significant; EDF expects its full-year earnings before interest, tax, depreciation, and amortization for 2026 to fall by 10% due to low market prices and reduced power output. The low water levels also impede the transport of essential goods like coal and fuel on key routes such as the Rhine, where levels at Kaub have dropped to 28 centimeters, the lowest since 2018.
