Bloomberg: Goldman sees $2 trillion surge in Europe energy bills by 2023

Energy bills for European households will surge by $2 trillion at their peak early next year, underscoring the need for government intervention, according to Goldman Sachs Group Inc. utilities analysts.

At their height, energy bills will represent about 15% of Europe’s gross domestic product, the analysts, led by Alberto Gandolfi and Mafalda Pombeiro wrote, according to Bloomberg.

Many European households are already feeling the bite of a steadily worsening energy crisis, brought on by Russian natural gas producers intermittently pausing flows along the critical Nord Stream pipeline following Western sanctions this year.

Energy bills at some restaurants and coffee shops have already more than tripled this year, but with threats looming that natural gas supply from Russia could become even tighter as the Ukraine War rages on, analysts warn that Europe’s coming struggles are set to rival some of the worst energy crises on record.

In their note, Goldman Sachs analysts approved price caps as a “very positive development” to help reduce energy stresses in Europe next year, but noted that even with price caps, the crisis would still be severe.

Goldman Sachs analysts estimated that price caps would save European households around 650 billion euros annually in energy bills, but given the meteoric rise in prices, families will likely still be saddled with extreme bills.

“Price caps would not fully solve the affordability issue: The increase in energy bills would still be over 1.3 trillion, or around 10% of GDP,” analysts wrote.

Goldman recommended further government actions—including a possible “tariff deficit” that would spread the costs of higher energy bills over the next 10 to 20 years, and more investments in renewable energy sources—to avoid the worst consequences of an energy crisis.

The analysts estimated that higher investment in renewable or low-carbon energy sources— including hydropower, solar, wind, and even nuclear power—could lead to a 75% drop in energy bill prices compared with current levels, as well as keep future energy costs more stable.