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
250
200
Delivery month Delivery quarters Delivery years
will take some time. The extent to which the
high energy and electricity prices and the associated
savings in energy consumption are
possible or will take place without a widespread
recession or hardship in the distribution
of scarce gas volumes is not yet foreseeable.
250
100
50
0
August
September
October
November
4Q22
1Q23
plant or not. The inclusion of other costs in
the bid price is usually even interpreted as
an abuse of market power and sanctioned by
the regulator. However, this means that all
power-generating plants have to make some
profit from marginal pricing over the course
of their lifetime in order to cover their fixed
costs (especially capital costs). While this
seems to be more than the case in the current
(fuel price) situation. However, in times
of lower fuel prices, sufficient fixed cost recovery
is not guaranteed and has not always
been the case in the past. Therefore, certain
phases with increased profits from marginal
pricing are necessary to compensate for
worse phases with insufficient fixed cost recovery.
For the consumer, marginal cost
pricing over a longer period of time therefore
means no disadvantage and no increased
electricity costs. Secondly, it is
worth taking a look at which plants benefit
particularly from high fuel prices. Basically,
over- and under-returns in marginal pricing
always occur when the power plant fleet
does not optimally match the energy-economic
framework conditions, e.g. fuel prices;
the system is not economically in equilibrium.
If the system had the possibility to react
quickly and without friction to the
current situation, it would build significantly
more renewables to save fuel costs. However,
it is precisely these renewables that currently
generate the highest additional revenues
compared to 2020, as shown in F i g u r e 4 .
Marginal pricing thus ensures that the highest
profits are generated by the generators
that are most urgently needed for more efficient
and cheaper electricity production and
thus creates the highest incentives to invest
in precisely these technologies.
2Q23
20.7. 17.8.
Fig. 8. Derivatives market prices natural gas Germany THE EEX (20 July and 17 August 2022)
– in € /MWh.
3Q23
2023
2024
2025
2026
The price increases in recent weeks and
months have already led to various reactions.
In the residential customer sector,
there have been the first supplier failures;
customers suddenly prefer to switch to the
basic supply tariff 13 because it is becoming
more attractive in terms of price and, conversely,
basic suppliers are adjusting their
tariffs significantly. Industrial customers
who have bought electricity for the long
term are in a comparatively favourable situation,
but they are also looking ahead and
know they must continue to hedge their
bets. And there are also companies that have
repeatedly missed the right entry into hedging
and are now paying heavily into the spot
market. According to a DIHK survey 14 , considerable
quantities of gas for 2022 still had
to be procured in July. About half of the industrial
companies have already secured
their gas requirements. But more than a
third still had to purchase (as of July 2022)
more than 30 percent of their annual demand
for 2022. This corresponds to around
50 TWh of gas. However, industrial companies
have also often reacted extraordinarily
quickly: Evonik replaces up to 40 % of the
natural gas demand at its German sites with
LPG (Liquefied Petroleum Gas), including in
a natural gas power plant. 15
Should Russia continue to supply significantly
less gas or none at all, it is already
clear that the demand side will have to make
a relatively large contribution in the near
future to balance supply and demand. So,
depending on the weather, more or less gas
will have to be saved in the coming winters.
Alternative solutions such as ‘real’ efficiency
gains (i.e. the same output with less energy
consumption), the development of alternative
gas supply routes and infrastructure,
and the expansion of renewable energies
13
The basic supply tariff is a tariff that is available
for everyone also on short notice. After
liberalization this tariff was definitely not the
most competitive one, but the tariff of last resort
e.g. when a supplier defaulted and the
customers need immediate access to energy.
14
DIHK, Press release: Sharp rise in energy prices
jeopardises production in Germany,
25.7.2022
15
Evonik, Press release: Evonik substitutes up to
40 percent natural gas at German sites,
8.8.2022
For investors and operators of renewable energies
in particular, the situation has turned
very positive within a very short time. Before
the Covid-19 crisis, experts were thinking
that plants leaving the EEG 16 could no
longer be operated at the expected electricity
price level 17 . In the meantime, the use of
the so-called “Ü-20” plants is very much
continued by means of corporate PPAs for
two to three years. Similarly, other power
plants suddenly find a much better deal.
2 Current situation with
regard to electricity
generation capacity to
meet demand in Germany
As of 31 May 2022, Germany had a net installed
electricity generation capacity of
232.0 gigawatts (GW). 18 Of this, renewable
energy plants accounted for around 60 %
(138.6 GW) and conventional plants for
around 40 % (93.4 GW). Of the total installed
capacity, 12.5 GW of power plants
are located outside the electricity market.
These are lignite units in security standby,
system-relevant plants based on hard coal,
natural gas and petroleum products that are
only operated at the request of the transmission
system operators for the purpose of
maintaining security of supply (grid reserve),
temporarily decommissioned plants
based on natural gas and petroleum products,
and natural gas capacity in the capacity
reserve.
The net capacity of electricity generation
plants on the electricity market as of 31 May
2022 was 219.5 GW accordingly. Of this,
81.0 GW is accounted for by conventional
and 138.6 GW by renewable energy plants
(Table 1, Figure 9).
The highest load achieved in Germany in recent
years as measured by the transmission
system operators, which usually occurs in
the early evening of a winter month (and
16
The EEG (Erneuerbare-Energien-Gesetz) is
the legal basis for the promotion of renewable
energies for electricity generation in Germany
(promotion of plants up to 20 years).
17
B. Glensk, R. Madlener, Energiewende @
Risk: On the Continuation of Renewable Power
Generation at the End of Public Policy Support,
FCN Working Paper No. 05/2019 (May
2019).
18
Includes offshore wind power in the Exclusive
Economic Zone (offshore); in addition, the
reported data on electricity generation capacity
on the electricity market includes plants
that are installed in Austria, Luxembourg,
Switzerland or Denmark, but feed directly
into the German grid.
78 | vgbe energy journal 10 · 2022