Lucky German Electricity Consumers

These are the questions that we attempt to answer through a careful analysis[1] of these "unidentified financial objects", unidentified, that is, before 2008 when they were introduced via the electricity transaction market exchange for Western Europe, namely the EPEX (European Power Exchange).

Thanks to a precise examination of the price data provided for each fifteen minutes block during the year 2017 on the internet site of an organization dedicated to solar energy and very much involved in Germany's energy transition, the "Fraunhofer Institut für Solare Energiesysteme": www.energy-charts.de, this study identifies a rather inconceivable phenomenon. Indeed, 2017 has witnessed:

• 119 days during which the wholesale price was negative during at least one fifteen minutes block, that is one "negative day" every three days;
• "negative day" occurrences that add up to 182 hours at an average price of -20€/MWh;
• 9 groups of 4 to...11 consecutive days with negative wholesale prices and, more importantly,
• 38 negative Sundays out of 53, and almost 3 "negative holidays" every 4.

Clearly, these recurrent balance defects are the result of temporary excess production from intermittent renewables (iREL), solar PV and wind, that can occur in the daytime and during the night, (almost as much) in summer as in winter. More specifically, excess iREL production relative to conventional electricity (fossil, nuclear, hydro,...) does seem to be the main cause of these collapsing wholesale prices. While Germany sometimes does not need more than 30 GW at night and 40 GW in the daytime in the summer, its solar PV and wind installed capacity at the end of 2017 was up to 98.5 GW, comparable to the conventional power fleet capacity.

In such conditions and taking into account the blatant absence of storage solutions at the scale required (it is not with batteries that iREL production variations can be compensated), electron exports to the neighboring countries serve as the adjustment variable for the equilibrium of production to demand, this equilibrium being crucial for the grid security. This is manifest in the statistics: between 2011 and 2017, German exports have increased by 22.3% while those of the other European countries have declined by 15.8%.

Thus, German policy is impacting the European electric grid to such an extent that 3 countries - Belgium, Poland and the Czech Republic -  are doing their best to limit the inflow of undesired electrons, to the dismay of the European Commission.

Aside from astonishment and revulsion in view of this not too ecological waste (did you know that Germany's CO₂ emissions from its electricity generation are equivalent today to what they were in 2009? Thanks a lot for the climate!) and its communication of negative signals to long term potential investors, the misguided orientation of the European energy policy must be condemned in that it weakens the entire continent, exposing it to a monumental black-out.

To abate such a risk, its cause needs to be eliminated: a market that is supposedly free but that is distorted by its acceptance of electricity which is paid for elsewhere ("feed-in tariffs" or "additional remuneration") and, worse, is uncontrollable. As a first step, it would be sufficient to do away with the subsidies granted to these now mature energy sources or at least to levy a "back-up tax" on them, that would finance investments in dispatchable power plants (Pumped Hydroelectric Energy Storage Plants, gas turbines, and so on...) able to provide the necessary supplement during their very natural failures. Will we have to wait until a big mess develops, such as the breakdown of November 4, 2006, caused by a foul-up in Germany, putting a large portion of Europe in the dark? Or, worse, a black-out similar to that of December 19, 1978 when France, deep in the oil crisis, was in the infancy of its... nuclear power program?

This is what transpires from this (39 page long) thorough study[1] which is also available as a more friendly (6 page long) summary[2]. This study does no more than support the self criticism voiced by the former Vice Chancellor of Germany and Federal Minister for Economic Affairs and Energy, Sigmar Gabriel: "We must make the Energiewende (the German energy transition) compatible with competitiveness...I know of no other economy able to sustain such costs. Renewable energies will  encounter austerity and they will have to progressively integrate the market economy."

May our decision makers draw on this statement.

[1]       link to the full document : Negative Electricity Prices in Germany (39 pages)

[2]       link to the summary document  : German Electricity and its Negative Prices    (6 pages)