PARIS/FRANKFURT, Aug 24 (Reuters) - European power prices are surging to fresh records as France grapples with lower nuclear output, adding further pressure to wholesale energy markets already struggling with vastly lower Russian gas supply.

Technical problems have hampered French nuclear reactors along with summer maintenance and drought has curbed hydroelectric production, another of its key sources of electricity generation.

Power from neighbouring countries is needed to help France handle its nuclear shortage. With gas making up the majority of the deficit, the extra demand is driving prices higher again.

“In France, only half the reactors are running,” said German state secretary in the economy ministry, Patrick Graichen.

“France is buying elsewhere even if power is expensive,” he said, adding Germany and gas-heavy Italy are sending power to France.

France and Germany account for two thirds of western Europe’s power consumption within an interconnected market.

The benchmark German front-year baseload power price on Monday set a record high of 709 euros ($708.01) a megawatt hour (MWh) and has gained 50% over the past fortnight.

The Dutch front-month gas contract set a record of 292.5 euros Monday and is nearly 40% up from two weeks ago.

The soaring electricity prices are feeding back into gas, which is burnt for power in competition with coal, and raises costs of permits to emit CO2.

“Gas is still needed (for power), and in an increased degree as well, since hydropower and nuclear power is so low,” Rystad analyst Fabian Ronningen said.

European coal futures for 2023 hit a record high this week of $332 a tonne and carbon prices have also been at all-time highs not far off 100 euros a tonne.

Power had already been surging from last month after Russia’s Gazprom (GAZP.MM) did not fully restart the Nord Stream 1 pipeline after maintenance, citing trouble with a turbine and raising prospects that power stations will suffer acute shortages.

Then Gazprom said last Friday that flows will be halted again for three days from Aug. 31. read more

“The market is pre-empting the possibility of Nord Stream 1 not starting up again and remaining at nil,” Graichen said.

DEMAND DESTRUCTION

Commerzbank said the German annual year-ahead contract has doubled in four weeks and at the Monday level of 700 euros, it was 14 times the seasonal average of the past five years.

“This further increases the pressure on energy-intensive industry, meaning that further closures of production facilities – for example of aluminium and zinc – are likely,” it said.

Smelters depend on cheap electricity.

There is no help from renewable power as the hot weather has curbed wind and hydro production and helped drive what analysts call a deficit in residual load.

Residual load is the power demand left for conventional power plants, like gas- and coal-fired plants, after accounting for renewables production.

However, there are two factors to help lift power supply.

After some rainfall, the German Kaub Rhine river measuring point, which shows what can be carried on raw materials barges to the middle and upper Rhine, was at 118 centimetres (cm) Wednesday, compared to a low this summer of 32 cm.

When levels fall below 30 cm it becomes uneconomical for many vessels to continue their journeys.

Also, in response to gas being scarce, Germany has a second hard coal plant that was originally idled set to rejoin the power grid, Uniper’s (UN01.DE) Heyden 4 of 875 megawatts (MW).

Due to come back from Aug. 29 through April 30, 2023, Heyden follows the 690 MW Mehrum plant, which restarted operations on Aug. 2. read more

($1 = 1.0014 euros)