How is the current energy crisis affecting households and how can we reduce its impact?

Since the beginning of 2022, Europe has been facing an unprecedented energy crisis. We are going to break down all the keys, how it affects us as consumers and some strategies that will help us minimize its impact on our day-to-day lives.

What is the energy crisis?

An energy crisis is a temporary shortage of the supply of energy resources. But its impact is felt across the board, from a halt in productive activity to an increase in inflation due to the rise in energy prices caused by shortages.

The consequences for consumers include a significant increase in spending and, consequently, a loss of confidence in the markets. Moreover, if these impacts persist over time, energy crises can end up in an economic recession.

Energy crises in the past

In 1973 and 1979 there was a reduction in the supply of oil. The first was in response to the support of Western countries for Israel in the Yom Kippur War. The Organization of the Petroleum Producing Countries (OPEC) decided to curtail oil extraction, causing shortages in order to pressure Western economies to withdraw their support for Israel. The second of the crises is also the outcome of the start of a war, the Iraq-Iran conflict, which pitted two major oil producers against each other.

Since then, different scenarios have continued to cause energy crises, which have put countries around the world under strain.

The Energy Crisis of 2022

The Ukraine War is behind the energy crisis we are currently experiencing. Russia is one of the largest exporters of gas, especially to European countries, and as a result of the trade blockade imposed on this country, it is limiting the supply of gas to economies throughout Europe, since many countries are highly dependent on this supply.

There are other countries with the capacity to export gas to Europe, but this alternative comes with some challenges:

• The extraction volume is limited, and investment and time would be required to increase that volume and respond to Europe's growing energy needs.
• Transporting gas poses another challenge: it requires infrastructure that, due to the distance, significantly increases investment, considering that gas pipelines would not be able to cross Russia or Ukraine to reach Europe.

There are other solutions, such as diversifying the sources of energy in the supply, which also present some challenges:

• Increasing generation in nuclear power plants also represents a strain on investment, especially if some plants are under maintenance and if there is no end to the drought hitting the continent. In addition, this is something that must be planned in advance, so the solution would not be immediate.
• The drought also adversely affects hydropower, causing its production to plummet.
• Decarbonisation reduces the margin of energy produced from fossil fuels.

A strategy to diversify the energy supply, limiting dependence on a specific supply, involves the promotion of renewable energies, which could be a sustainable model for the future of Europe.

Renewable energies, a key piece in the energy landscape

As we have seen, we need to adapt the model to the current scenario but also to the future, in order to guarantee the supply that will allow our economies to grow and our well-being to consolidate. And renewables offer advantages that support this model. Let's see why:

• They underpin energy independence: Increasing energy production from renewables makes us less dependent on third-party supplies, subject to international fluctuations in terms of volume or prices.
• They are shaping the energy model of the future, along the path of decarbonisation.

In addition, investment in innovation improves the performance of these energy sources, and reduces the cost of their infrastructure and, therefore, their price.

It's important to remember that Spain, due to its strategic geographical location, has numerous renewable resources, mainly solar and wind energy, albeit without forgetting the potential in tidal and geothermal energy.

What can we do to reduce the impact of the energy crisis?

Both the European Union and the Government of Spain have put in place measures to cushion the impact of this energy crisis. One of the most prominent measures is the promotion of energy efficiency, with the ultimate goal of reducing energy consumption in the European Union.

Indeed, the price of energy has risen due to the shortage of supply that we have explained above. Moreover, energy is also necessary to offer products and services, which have consequently become more expensive due to the rise in energy prices. Reducing demand to align with supply causes the price to go down.

But, beyond these economic measures, in your day-to-day life, there are some actions you can take to ensure that the rise in energy prices does not affect your budget:

• Don't waste energy: There are many ways to be more efficient, from increasing your home's energy rating to placing light sensors in your home so that your lights only turn on when they detect presence or movement. LED lights, electronic devices with the highest energy rating, or eradicating phantom consumption in your home can be achieved with some measures. Look for those that you can easily implement and start reducing your consumption.
• Study your routine and look for the energy plan that best suits you. At Endesa, we offer you a multitude of plans that fit your way of life, so that you do not give up comfort while reducing your bill. Our advisors will be happy to listen to your needs and discuss the best options for you.
• Review your habits: by changing small habits, we can turn our energy consumption around. For example, opting for public or sustainable transport instead of travelling by private car.