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Wednesday, February 1, 2023

Consistently high power generation with gas becomes a problem

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Status: 07/20/2022 06:37

Although Russia currently hardly delivers gas to Germany, it is still widely used for electricity generation in this country. This is a problem for filling gas storage – and for electricity prices.

For years, the scientists at Fraunhofer ISE in Freiburg have been collecting all the data provided by the power exchange and processing it daily. This spring they had a surprise: as Russia drastically cut gas supplies and politicians called for gas savings, and as gas prices soared to all-time highs, electricity generation from natural gas hit a record high in May. Gasoline tanks are therefore filling up slowly, and consequently the reserves required by law for the coming winter are more difficult to achieve. To date, mid-July, nothing has changed. The wind and the sun provide a similar amount of electricity as in previous years. So why is so much gas used to generate electricity?

Replacement of French nuclear power plants in difficulty

The reasons for this lie in France. There are 56 nuclear power plant units there, and 16 of them are shut down for a few weeks for routine annual maintenance. In addition, twelve others are currently out of service for a longer period due to corrosion on the cooling pipes or suspected damage of this type. Where cracks have been observed, the 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 restart, other nuclear power plants of similar construction 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 has been importing for years. Also this year – as usual – some terawatt hours to the Benelux countries and the Czech Republic. Exceptionally, however: more than eight terawatt hours were routed to France, another ten terawatt hours to Austria and more than three to Switzerland. Much of this sum went to Italy, which normally also buys French nuclear energy. This is how German gas-fired power plants operated to compensate for the failure of troubled French reactors. This circumstance also led to higher electricity prices in Germany.

Why are electricity prices rising?

Electricity prices on exchanges have risen from around four cents to over 20 cents. However, despite everything, natural gas only contributes around 15% of Germany’s electricity production. Even if the price of gas increases massively, a multiplication of the electricity exchange price is surprising. Lignite is extracted from the ground by the power plant operators themselves at virtually unchanged costs; Wind, solar and hydroelectric power have become cheaper rather than more expensive. However, the special rules of the power exchange provide the operators of such systems with huge profits.

In short-term trading, an estimate is first made of how much electricity will be needed in the coming hours or the next day and how much can be covered by wind and sun. Then an auction begins, in which the cheapest, mostly lignite-fired power plants come first. The more electricity is needed, the more expensive the power plants – often coal-fired – are. Finally, the most expensive, namely gas-fired power plants, offer their electricity. So far, so logical. Ultimately, however, all generators – even the cheapest ones – get the price achieved by the most expensive power plant. And because long-term power trade prices are also based on short-term trade prices, prices there have also increased massively.

Since electricity providers typically buy most of their goods from generators one to three years in advance, this increase for end customers will only be felt in the years to come. However, experts expect end-customer prices to rise from around 35 cents per kilowatt-hour today to 55 cents over the next year. For an average household of four people, this would represent an additional charge of 760 euros per year.

What to do about “war profits”?

At the same time, the profits of power plant operators will increase by around 60 billion euros per year. At the suggestion of Economics Minister Robert Habeck (Greens), the Bundestag has now passed a law by which coal and oil-fired power stations, which were previously only on standby as a reserve, must return to the regular stock market and crowd out natural gas power plants. Natural gas consumption could fall as a result – but not prices. Because hard coal and oil have also been supplied to a large extent from Russia so far and the price has risen considerably.

As early as March, Minister Habeck had publicly considered skimming excessive profits, for example through a special tax. For request of ARD his ministry has now explained that it was very difficult – they were still working on concepts for it.

Power plants that could come back online

Plusminus reports on this and other topics today starting at 9:45 p.m. in the premiere.

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Source www.tagesschau.de

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