Autumn storm Herwart has caused chaos on the German energy market. Because of the strong wind, electricity prices collapsed into the negative. Consumers, however, won’t benefit from negative prices. For them, electricity is becoming even more expensive.
Storm ‘Herwart’ has caused extreme turbulences in Germany. Now it has been revealed that the storm last weekend not only uprooted trees, brought down roofs and paralysed train services. The gale-force gusts at speeds of up to 140 km per hour also caused chaos on the German energy market.
That is because ‘Herwart’ caused a lot of wind which in turn generated so much wind energy that the price of electricity almost collapsed. Within minutes the prices for electricity on the energy exchange EEX went down — the market was thrown upside down. Those who sold their electricity suddenly had to pay their customers. At the hight of the storm, the price dropped to minus 83.06 euros per megawatt hour. On average, the price was down to minus € 52.11, the lowest since Christmas 2012. At “normal” times electricity is traded for around 37 euros per megawatt hour – plus 37 euros.
In a rather sobering way Herwart shows the blatant flaws of Germany’s green energy transition. The latest collapse at the weekend may have been particularly dramatic. Yet negative prices on Germany’s power exchanges have become part and parcel of everyday energy. Whenever German solar panels or wind turbines produce more energy than is needed, it comes to a glut of electricity and prices plummet.
The reason is the Renewable Energy Sources Act (EEG) which systematically eliminates market forces. Each producer of renewable electricity is allowed to feed their kilowatt hours into the grid, regardless of demand. Grid operators are required to take electricity at a fixed rate and trade surplus electricity on the EEX stock exchange. Private consumers do not benefit from the negative electricity prices, but have to pay even more.
If the prices on electricity exchanges are negative, the difference between the guaranteed rate and the market price and as a result the corresponding subsidy costs increase. This in turn leads to a rise of the renewable energy surcharge which must be paid by German households. This year, the surcharge has risen to a record high of 6.88 cents per kilowatt hour…
The profiteers of this negative price paradox are Germany’s neighboring countries. “They like to take our surplus electricity off and at the same time shut down their own power plants,” says industry expert Struck. Especially in countries like Switzerland and Austria, this method works splendidly. Operators of so-called pumped storage reservoirs in the high mountains fill their reservoirs with Germany’s free electricity. This practice works perfectly as electricity from foreign power plants is later sold back to Germany at lucrative prices.