Status: 07/20/2022 06:37 a.m
Although Russia is currently hardly delivering any gas to Germany, it is still used a lot for electricity generation in this country. This is a problem for filling the gas storage – and for electricity prices.
For years, scientists at Fraunhofer ISE in Freiburg have been collecting all the data supplied by the electricity exchange and processing it on a daily basis. This spring they experienced a surprise: While Russia drastically reduced gas supplies and politicians called for gas savings, and while gas prices rose to unprecedented heights, electricity production from natural gas reached an all-time high in May. The gas tanks filled up accordingly slowly, and consequently the reserves required by law for the next winter are more difficult to reach. To this day, mid-July, nothing has changed. Wind and sun supply a similar amount of electricity as in previous years. So why is so much gas used to produce electricity?
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Replacement for ailing French nuclear power plants
The reasons for this can be found in France. There are 56 nuclear power plant units there, and 16 of them are shut down for a few weeks for usual annual maintenance. In addition, twelve more are currently out of service for a longer period of time due to corrosion on the cooling pipes or suspected damage of this kind. Where cracks have been found, operator EDF hopes to be able to repair them by the fall. However, the group is already warning of possible longer downtimes. And even if individual blocks start up again, other similarly built nuclear power plants must also be checked for cracks – and German power plants will also have to fill the gap for a long time to come.
Germany has been exporting more electricity than it imports for years. Also this year – as usual – a few terawatt hours to the Benelux countries and the Czech Republic. Unusually, however: more than eight terawatt hours flowed to France, an additional ten terawatt hours to Austria, and more than three to Switzerland. A large part of this flowed on to Italy, which normally also buys French nuclear power. This is how German gas-fired power plants ran to compensate for the failure of ailing French reactors. This circumstance also caused electricity prices to rise in Germany.
Why are electricity prices rising?
The prices for electricity on the exchanges have risen from around four cents to more than 20 cents. However, despite everything, natural gas only contributes around 15 percent to German electricity generation. Even if the gas price increases massively, a multiplication of the exchange price for electricity is surprising. Lignite is extracted from the ground by the power plant operators themselves at practically unchanged costs; Wind, sun and hydropower became cheaper rather than more expensive. However, special rules of the electricity exchange bring massive profits to the operators of such systems.
In short-term trading, an estimate is first made of how much electricity will be required in the coming hours or the following day and how much of this can be covered by wind and sun. Then an auction begins, in which the cheapest power plants, mostly lignite, come first. The more electricity is required, the more expensive power plants – often hard coal – come into play. Lastly, the most expensive – namely gas power plants – offer their electricity. So far, so logical. In the end, however, all producers – even the cheapest ones – get the price that the most expensive power plant achieved. And because the prices for long-term electricity trading are also based on short-term exchange prices, prices there also rose massively.
Because power supply companies usually buy most of their goods from producers one to three years in advance, this increase for end customers will only become apparent in the coming years. However, experts expect end customer prices to rise from around 35 cents per kilowatt hour today to up to 55 cents over the next year. For an average four-person household, that would be an additional burden of 760 euros per year.
What to do against “war profits”?
At the same time, the profits of power plant operators will increase by around 60 billion euros annually. At the suggestion of Economics Minister Robert Habeck (Greens), the Bundestag has now passed a law with which hard coal and oil-fired power plants, which were previously only on standby as a reserve, are to return to the regular stock market and oust natural gas power plants. Natural gas consumption could fall as a result – but hardly the prices. Because hard coal and oil have also been supplied to a large extent from Russia so far and the price has risen significantly.
As early as March, Minister Habeck had publicly considered skimming off the excessive profits, for example through a special tax. At the request of ARD his ministry now explained that this was very difficult – they were still working on concepts for it.
Power plants that could go back online
Plusminus reports on this and other topics today from 9.45 p.m. in the first.
