European Drought Depletes Hydropower Reservoirs Ahead of Winter

Repeated heat waves and droughts across Europe have reduced hydropower reservoirs to multiyear lows, creating risks for energy stability and pricing. Water levels in France, Italy, and Switzerland are notably low, while stocks in southern Norway have dropped to their lowest levels in more than a decade.

Kjetil Lund, director of water resources and energy at the Norwegian Water Resources and Energy Directorate, warned that these shortages could cause power prices to surge. This trend is already evident in Austria and Italy, where electricity prices have risen relative to Germany. The shortage is particularly critical because hydropower is used to balance fluctuations in wind and solar generation.

Energy strategist Florence Schmit of Rabobank noted that these deficits may force the power sector to increase its reliance on natural gas. This transition comes at a time of existing volatility, as natural gas prices remain elevated due to LNG supply disruptions following the closure of the Strait of Hormuz.