European energy prices will remain volatile and will keep increasing for more years, a rating agency predicts.

S&P Global Ratings announced it has raised its base-case assumptions for power prices by more than 10% in five of Europe‘s main markets between 2022 and 2023 compared to its September 2021 assumptions.

The analysis notes that the main reason for doing this is higher anticipated commodity and gas prices for at least the next 18 months.

The authors of the report expect greater ‘weather-related’ price volatility.

A contributing factor for that is Europe’s accelerated closures of thermal and nuclear-powered plants.

A gap that cannot be fully filled by renewables in the next three years, according to the study.

The rating agency expects power prices to normalise after three years when more renewable capacity will be commissioned.

Massimo Schiavo, Director and Senior Analyst for EMEA Utilities at S&P, said: “We believe solar and wind power will only gradually fill the gap, implying a tighter supply-demand balance over the next three years and greater use of gas in the meantime.

“As a result, we expect that the energy transition will not be smooth over this period, with a still-high dependency on volatile global gas prices.”