vgbe energy journal 10 (2022) - International Journal for Generation and Storage of Electricity and Heat

Future-proof, secure and climate-friendly electricity supply in Germany
Technology/ Efficiency CO 2 -Intensity SRMC Power
Energy sources from to from to from to case cumul.
% kg/MWh €/MWh GW
Renewable energies - - 0 0 2,5 2,5 33 33
Nuclear energy - - 0 0 5 5 4 37
Lignite new 43 41 947 1,001 86 91 3 40
Old lignite 38 33 1,080 1,243 98 113 13 53
Hard coal new 47 44 731 776 146 155 8 61
Hard coal old 40 36 854 949 170 189 7 68
Natural gas new 58 45 345 448 249 324 13 81
Natural gas old 42 25 474 806 343 582 15 96
Oil and other fossil ener. - - - - 750 800 7 103
Price assumptions used:
Approaches for renewable energies
Price hard coal: 277 €/t (6,000 kcal/kg)
Technology Capacity Availability Available
capacity
Price natural gas: 116 €/MWh th
GW h/a % GW
Costs lignite: 3 €/MWh th Wind offshore 8 3,500 40.0 3.20
Price CO 2 : 83 €/t
Wind onshore 56 2,250 25.7 14.38
Photovoltaics 59 900 10.3 6.06
Biomass 10 8,000 91.3 9.13
Total 133 - - 32.77
Basis: BDEW, natural gas data as of 15.08.2022 and
NEP Electricity 2017
Fig. 5. Approaches used to create a merit order for Germany for the year 2022.
further to the left the corresponding power
plant is in the merit order – i.e. how ‘deep in
the money it is’. Consequently, renewables,
nuclear energy and coal-fired power plants
have the largest additional revenues. Gasfired
power plants, on the other hand, especially
if they are price-setting in the corresponding
hour, i.e. are exactly at the intersection
of demand and merit order, continue
to make no profits according to the merit
order principle, since the increase in revenue
only compensates for the increase in
fuel costs.
In fact, wholesale prices for electricity have
risen strongly. The first seven months of
2022 (including the first two weeks of August)
show another strong increase on EPEX
SPOT with an average value of € 217.82/
MWh for base deliveries. The future price
development can also be observed – at least
as the market sees it: The forward price
curve also showed a strong increase between
July and August 2022. In addition, it
is in a very clear “backwardation”, i.e. the
price for power delivery base in the next
year 2023 is (as of mid-August 2022) at its
highest with 512 €/MWh and then decreases
year by year to 321 €/MWh in 2024 and
218 €/MWh in 2025. The market thus expects
a certain easing of the situation in the
course of 2024. But the ‘end’ of the forward
curve is also significantly elevated compared
to prices before 2021, as a very strong
shift away from pipeline gas is expected, resulting
in a higher price level even in the
more distant delivery years (F i g u r e 6
and Figure 7).
In addition to the high gas prices, there are
also risk premiums – large consumers of energy
are currently willing to pay premiums
in order to have a guaranteed price for the
next few years. Therefore, the picture looks
even more extreme in terms of forward prices
for the next few years: These were (as of
mid-August 2022) at € 213/MWh for 2023,
at € 143/MWh for 2024 and at € 88/MWh
for the delivery year 2025 – and thus significantly
higher than in mid-July. The forward
prices are relevant for large consumers and
1,000
900
800
700
600
500
400
300
200
100
-
August
September
October
Appointment
prices month
November
December
January
February
March
April
4Q22
1Q23
2Q23
3Q23
4Q23
1Q24
2Q24
3Q24
4Q24
municipal utilities, as they usually buy their
volumes forward several years in advance.
Energy consumers should therefore prepare
for a significantly higher energy price
level, both for natural gas and electricity
(Figure 8).
Politically, there is currently an intense debate
on whether marginal pricing should be
retained or replaced by other concepts due
to the sharp increase in profits for certain
producers and the sharp increase in costs for
consumers. This question cannot and should
not be discussed extensively and conclusively
in this article. However, it definitely makes
sense to take a closer look at the principles
and advantages of marginal pricing. Firstly,
at first glance it does not seem logical that all
producers are remunerated with the costs of
the most expensive power plant, even if
their own costs are significantly lower. However,
it must be considered that in marginal
pricing only short-term, variable costs are
ever taken into account, as only these are
relevant for the decision to ramp up a power
Forward
prices quarters
1Q25
2Q25
2023
2024
2025
2026
2027
2028
2029
Forward
prices years
Base (20.7.) Peak (20.7.) Base (17.8.) Peak (17.8.)
Fig. 6. Forward price curve power Germany EEX (20 July and 17 August 2022) – in € /MWh.
700
600
500
400
300
200
100
-
January
March
May
July
September
Month Quarter Year
November
January
March
2Q21
EPEX SPOT
4Q21
2Q22
4Q22
2Q23
4Q23
EEX
2Q24
4Q24
2Q25
2018
Fig 7. Power Germany average values spot exchange EPEX SPOT and forward prices EPEX
(17 August 2022) – in € /MWh.
2020
2030
2031
2032
2024
2026
2028
2030
2032
vgbe energy journal 10 · 2022 | 77