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Has electricity decoupled from natural gas prices in Germany?
- anovikov 6mo agoNice! This is the first time i see anyone providing a quantitative answer to this. When the effect becomes more pronounced, it will hopefully remove political barriers for renewable electricity.
- konschubert 6mo agoYes! A widening gap between electricity cost and gas cost (and fuel cost) will be THE main driver of electrification! Installing a heat pump will be a no-brainer, driving an electric car will be a no brainer. This can only happen once electricity decouples from gas prices - but that requires lots of renewables in the mix!
- anovikov 6mo agoQuite frankly, Germany already has a lot of renewables in the mix. Why did it take so long for the effect to appear and why is it still so modest? What should be renewables share be (vs ~60% today), for complete decoupling?
- konschubert 6mo agoYou need quarter-hours where renewables set the price for power. That's only happening now that renewables have reached sufficient penetration of the market. And it will get more as batteries come online. In a commodity market, the price is always set by the most expensive producer that is still able to sell. That's natural - why would I sell my apples cheaper than the other farmer if you need so many apples that you have to by from both of us?
- stevesimmons 6mo ago... because you may have signed a longer term contract that might in turn guarantee offtake from you rather than the other farmer? This marginal price is only for the spot market right? So the key question is more what % of the mix is spot vs longer term. And thus what the overall impact is on total blended price.
- konschubert 6mo agoThat exists as well it’s called PPA in the power market, a power purchase agreement. But ultimately, due to arbitrage, PPA prices will converge towards expected spot market prices.
- NoLinkToMe 6mo agoGermany is interconnected with other markets. Essentially it's not an isolated market, but part of a bigger whole. As an example imagine a village that constituted 1% of the population of a country. The village was 100% renewable, and the country was 0% renewable. If the village disconnected its grid, in isolation its prices would be dictated by its renewables. But if its connected, its renewables just get traded on a market with marginal prices. If a person elsewhere in the country has more expensive generation, they'll but your cheap renewables at their price level. Thus the village will experience high prices like everyone else. Now suppose Germany is that village in an interconnected EU market. Of course the numbers from my example are exaggerated, but the point remains: Germany's renewables aren't enough, if pricing is set at a much larger market, with fewer renewables. Today about 20% of Germany's electricity was exported. While only about 6% of its demand came from gas. In other words if Germany was disconnected, it'd have needed no gas, and thus prices would've been lower. Of course disconnecting isn't a good idea for other reasons, as on other days Germany imports. And Germany's ability to export its renewable excess generates significant revenues, creates incentives to build more renewables, and offsets emissions and pollution in other countries, too. But long story short, it'll take more for one part of the whole to go renewable. As the EU is generally transitioning towards renewables we see a decoupling happen.
- jacquesm 6mo agoThat's more of a political and tax decision than anything else.
- hobofan 6mo agoI'm not deep into electricity pricing dynamics, but based on my intuition, shouldn't that rather have a dampening effect on electrification, as the gap widens? High gas prices + gap is small -> Big opportunity to undercut via cheaper methods like solar -> attractive investment -> more new builds High gas prices + gap is wide and widening -> Smaller and smaller opportunity to invest in solar, as the market is already dominated by solar prices -> less attractive investment -> less new builds Am I missing something here?
- pjc50 6mo agoHigh volatility -> Invest in storage. Occasional negative prices -> Invest in intermittent consuming applications.
- konschubert 6mo agoWith electrification, I meant electrification of energy consumption.
- hobofan 6mo agoAh, of course. Thanks for the clarification!
- senko 6mo agoHeat pump prices + cost of installation was so high the last time I looked 2years ago, that it wasn't worth it even with free electricity (rooftop solar). Have the costs dropped for that as well?
- kristofferR 6mo agoObviously that's impossible to answer without knowing your specific situation, nevermind even knowing which country you are speaking of. Heat pump prices aren't high here, heat pumps are just aircons with some extra cheap parts after all.
- senko 6mo agoI was thinking in general. But specifically: I'm in Croatia (so prices should not be that far off from German ones - equipment perhaps more costly but manual work a bit cheaper) and was quoted (two years ago) for a €15k total installation cost for the size I needed, which would be 15-20 years' worth of my natural gas usage. Even at zero electricity host (I have rooftop solar), the investment didn't make a lot of sense at the time, assuming the costs would be falling in the next few years.
- mono442 6mo agoAir to water heat pumps (which usually are used in Germany) should be quite cheap nowadays. Maybe they tried overcharging you or a significant rework was required?
- chopin 6mo agoI just have been quoted 40k for an installation. So, no.
- deleted 6mo ago[deleted]
- chopin 6mo agoHeat pump installations are far too expensive in Germany to make any sense economically.
- sbdjdkdkdkdk 6mo ago[flagged]
- jeffbee 6mo agoDamn, you're right. Once they burn this tranche of solar panels the Chinese will really have them over a barrel.
- jacquesm 6mo agoOh ffs, get the FUD out of here.
- heyitsmedotjayb 6mo agooil and gas famously never requires subsidies
- throwaway5752 6mo ago50 years from now when those panels produce less than 75% of nameplate capacity they'll really regret not depending on a market where the swing producer is a cartel of theocratic dictatorships.
- citrin_ru 6mo agoA dependency on solar panels which needs to be replaced every 5 years is less bad then a dependency on gas which is burned every day. Having said that nuclear decommission was a huge mistake.
- wongarsu 6mo agoNote that "gas" in this context means natural gas, not gasoline As noted in the methodology below, they are measuring the gas-implied level as the marginal running costs of a combined-cycle gas turbine plant: the price of the natural gas necessary to generate a given amount of electricity, plus the cost of the necessary carbon credits to burn that natural gas. Then they compare that to the actual electricity price
- lxgr 6mo ago> Note that "gas" in this context means natural gas, not gasoline Of course it does, why would anybody say "gas" when they are talking about a liquid? :p
- IshKebab 6mo agoDon't tell this guy about LNG! (But yeah gas is a terrible name for petrol.)
- embedding-shape 6mo ago> Note that "gas" in this context means natural gas, not gasoline What's up with Americans consistently calling things "wrong" like this? "Gas" isn't even the right state of matter for the subject, nor is "football" actually a sport where the ball is mostly for the foot, almost like things are intentionally named bad.
- vrganj 6mo agoDid you know that "Danishes" were... Austrian?
- embedding-shape 6mo agoYou know, the first five times I read your comment it didn't make sense. This time I got curious enough to investigate what the hell you're talking about... Apparently in some countries there is something called "Danish Pastry" or "Danish" for short, I had no idea! Funnily enough, where I grew up, those are called "Wienerbröd" (and in Danish it's "wienerbrød", the same basically) which quite literally translates to "Viennese bread". So no, I didn't know "Danishes" were Austrian, but I did have the suspicion that Viennese bread was indeed Austrian :)
- snehk 6mo agoHas this benefitted the regular/average consumer? Nope. They pay more than they were with the "old" energy mix of more gas and nuclear. Telling people it could be worse isn't really something to be proud of. I personally now have solar panels on the roof and a heat pump so we only use electricity and don't rely on gas. Germany's strategy is really beneficial to households like my own. Unless you're relatively well off or on benefits, you're losing big time. The costs are constantly increasing with people telling others to just take money (you don't have) to install some solar panels on the house (you don't own) or buy an electric car (you can't afford).
- erispoe 6mo agoI have dynamic pricing in Germany and the cost of electricity when to literally zero for a few hours today.
- mullingitover 6mo agoSeems like the regular consumers you refer to would be paying even higher rates for gas and petrol if others weren’t electrifying.
- onli 6mo agoIf my electricity prices are no longer linked to gas prices, I can have cheaper electricity - my provider only produces green energy. But in the past raising gas prices would have also raised my prices, regardless. So yes, regular consumers can profit from this.
- snehk 6mo ago> my provider only produces green energy. But in the past raising gas prices would have also raised my prices, regardless. So yes, regular consumers can profit from this. It's one single grid. You get coal, nuclear, wind, solar, and everything else. If you buy from a provider, you get that mix.
- fundatus 6mo agoWell, the electrons arriving in your home will the same as your neighbours, regardless of which supplier you choose. But by choosing a different supplier you can steer which energy sources will be used to feed that grid, so it still makes a difference, just not exactly where you live.
- azan_ 6mo agoI wonder what prices would they have if they did not implement sunsetting of nuclear energy. Has to be the worst energy policy decision ever.
- sod 6mo agoIn a pieceful world, sure. But then there is this [1]. Don't blame the player, blame the game. [1] <https://en.wikipedia.org/wiki/Chernobyl_Nuclear_Power_Plant_drone_strike https://en.wikipedia.org/wiki/Chernobyl_Nuclear_Power_Plant_...>
- onli 6mo agoNo. Nuclear energy was at the same time very expensive and only a very small percentage of the energy production. Sunsetting the old plants had no negative impact at all on electricity prices, to the contrary, insofar as it made space for more green energy.
- qubex 6mo agoMy quant mind is sprained by the implied volatility around the mean.
- konschubert 6mo agosorry, can you elaborate? I am happy to fix it or add a caveat comment to the methodology section.
- wongarsu 6mo agoIt is incredibly volatile. Spot prices in the day-ahead auction for tomorrow are between -39€/MWh and 201€/MWh. And that's a pretty normal amount of volatility for this time of year https://energy-charts.info/charts/price_spot_market/chart.htm?l=en&c=DE&interval=month&legendItems=jy5y7 https://energy-charts.info/charts/price_spot_market/chart.ht...
- konschubert 6mo agoWe need more batteries for sure.
- pjc50 6mo agoWould be good to have more than a one sentence explanation of what you mean, but this is a result of low storage. In the oil market, if prices are too volatile you just stick it in a tank until they stabilize. You only get negative prices if all the storage is full, which happened to WTI once.
- ozlikethewizard 6mo agoGood for the Germans, in the UK we use marginal cost pricing, so consumers pay for the highest costing output regardless of how much if any they use. Means even if we get gas down to 1% well still be paying gas prices.
- shafyy 6mo agoMy understanding is that it's the same here in Germany. From the website > What does "decoupled" mean? In a gas-dominated electricity market, the marginal generator setting the price is almost always a gas-fired power plant (CCGT). That means electricity prices are structurally linked to gas prices — when gas rises, electricity rises with it. Decoupling happens when enough zero-marginal-cost renewable generation (wind, solar) pushes gas off the margin for enough hours that the annual average electricity price no longer tracks gas.
- konschubert 6mo agoIt's the same in Germany. The reason why power prices can still decouple: Because there are more and more quarter-hours where gas plants are NOT setting the price and the marginal cost is set by renewables. The same is happening in the UK. > , so consumers pay for the highest costing output regardless of how much if any they use. No, if no Gas is needed (!) for power production in any quarter-hour, the price is not set by gas. PS: Emphasis on needed. Gas plants may still be running at a loss for whatever reason (heat coupling, special contracts), but if they are not needed to provide the power, they will have to bid at a loss, and then they will not be able to drive the price.
- tialaramex 6mo ago> Gas plants may still be running at a loss for whatever reason My assumption, given how the UK numbers look when there are negative prices but still a little bit of gas running, is that shut down/ start up for a CCGT is so undesirable (expensive maybe?) that a 100MW plant which can say throttle to 5MW would rather pay to give you 5MW of electricity for the next half hour than switch off the plant and provide nothing then need to start it back up in a few hours. I don't know what "throttling" looks like for this equipment. It seems implausible that these units have no ability to control their fuel usage/ power output at all, just binary on or off, but on the other hand presumably in practice it's far from infinitely variable.
- morphle 6mo agoThis energy scam has been going on for more than 30 years in Europe and the UK. The former Economic minister and professor Yanis Varoufakis explains [1]. My Fiberhood cooperative has a solution: the Enernet smart grid where you pay $0.01 per kWh. We wire up one in three houses or more in a neighborhood with power routers. People buy and sell only solar electricity from panels in the neighborhood, from batteries and from every ev charging station on every parking spot in the neighborhood and from every parked ev. Each participating house saves $2000 to $5000 per year for 30 years or more[2]. You also get free 25 Gbps internet. You heat your house with a heatpump or cool the house with an ice storage ac powered only by solar. If the cooperative makes any money the share the profit with all the members or they vote to buy more solar panels and batteries. The cooperative gives loans to houses that can not afford their own panels. [1] Best version with info graffics https://www.youtube.com/watch?v=R3bo-s_OY4Q https://www.youtube.com/watch?v=R3bo-s_OY4Q or Longer version https://www.youtube.com/watch?v=NicE0-N9ux0&list=TLPQMDcwNDIwMjYYXs8OdtZ9yA&index=2 https://www.youtube.com/watch?v=NicE0-N9ux0&list=TLPQMDcwNDI... or short version https://www.youtube.com/watch?v=TaHepQyE37Q https://www.youtube.com/watch?v=TaHepQyE37Q [2] https://www.researchgate.net/profile/Merik-Voswinkel/publication/309254511_Fiberhood_Smart_Grid/links/5807410c08ae5ad1881691e3/Fiberhood-Smart-Grid.pdf https://www.researchgate.net/profile/Merik-Voswinkel/publica...
- pjc50 6mo agoIs this a thing that people can actually sign up to, or is it vaporware? Varoufakis says a lot of things that aren't necessarily true.
- fiberhood 6mo agoYou can sign up by becoming a member of the Fiberhood cooperative for free. Send an email to Fiberhood at icloud dot com. We must have your address and map location link or Google map address code so we can draw maps and make a website for your neighborhood to sign up and form an Enernet. We will do a small survey and put up a detailed map of your neighborhood (like openstreetmap, see the slide in this talk [1]). We hand out door to door flyers and organise a weekend barbeque neighborhood party where everyone can come see how the cable between neighbours goes roof-to-roof, window-to-window or garden-to-garden between power routers. See our cost price bifacial solar panels and the large batteries. We find that within a few weeks a few hundred people signed up for the cooperative and we start installing the first 10 houses. Most people invest in solar panels and batteries at wholesale prices installed by volunteers. Others get a loan to pay for this. You wind up getting payed for the panels you bought or paying around 1 dollar cent per kWh, saving a few thousand dollars per years for decades. In the US the Rocky Mountain Institute and its founder Amory Lovins describes this as 'grid defection' and it happens on a large scale now. Fiberhood has cooperatives forming all around the world, both rural and urban: Ukraine, Peru (near Iquitos by the Indian tribe on the Amazon River Bank, Southern Spain, Slovenia, Finland, The Netherlands, Australia. [1] https://www.youtube.com/watch?v=vbqKClBwFwI&t=5574s https://www.youtube.com/watch?v=vbqKClBwFwI&t=5574s
- _ink_ 6mo agoFor me personally it did not. I was a happy Tibber costumer until recently, meaning I was charged the quarterly hour spot price per kWh. The Iran War let to a significant jump in the price during the hours when renewables were low. I switched back to a traditional fixed price per kWh plan because of the high gas prices.
- deleted 6mo ago[deleted]
- ExpertAdvisor01 6mo agoIf anyone is interested here are the prices for electricity in munich (dynamic based on exchange price ). The price includes taxes & fees . 0:00-5:35 : ~ 0.32€ 5:35-8:45 : ~ 0.38€ 8:45-10.30 : ~ 0.30€ 10:30-16:45 : ~ 0.18€ 16:45-18:00 : ~ 0.31€ 18:00-24:00 : ~ 0.34€
- dr_kretyn 6mo agoIn Vancouver, we have somehow reverse curve - the incentive is to use more electricity at night when there's lower demand. As I understand, our main energy source is water, and so it has mostly flat generation. Nothing new - combining the two would make it cheaper all together.
- dgellow 6mo agoWhat’s the units?
- throw_await 6mo agoIt's per 1 kWh
- ExpertAdvisor01 6mo agoCorrect
- ninja3925 6mo agoThese are extremely high prices. In Texas, we pay 12-15c.
- holgerschurig 6mo agoYes, and they are higher due to 2 reasons. And both seem to work. Number 1 reason is that power was quite highly taxed, since it is directly linked with pollution and CO2. All powers, but that also means electrical power. The effect is, that european cars are smaller and use less. And also european houses are better insulated. You can measure this, the typical german 4 person household uses less than 50% of the electric power of a 4 person US household. Before COVID I even saw a statistics that this less usage compansated the higher electricity prices, so both norm-households payed the same for electricity. Unsure if that is still true post-COVID. The other reason is that also a good amount of money is directly invested into the grid, to make it more resilient. And you can also measure that. If you lookup the SAIDI (system average interuption duraction index) of e.g. USA and compare it to Germany, you immediately see why over there uninteruptible power supplies are hardly used except in data centers. SAIDI Germany 12.2 minutes per customer per year, USA 125.7 minutes per customer per year. That's a whopping 10x worse. Not just as number, but also for the industry. And I heard that the SAIDI in Texas is even worse than the US average.
- ndoddhdudhhd 6mo agoState propaganda: so you mixed in renewables as FREE?
- jillesvangurp 6mo agoDecoupling of energy prices from fossil fuel is going to be spreading around the globe. It's not that hard to grasp. If you are spending non trivial percentages of your GDP on stuff that you burn once in exchange for some twh of energy delivered, lowering that significantly will have a notable impact on your trade balance. Recent events in the middle east will have made a few countries keenly aware of how overly dependent they are on stuff coming from that region and how easily their economies are disrupted when stuff goes wrong there. I live in Berlin, electricity is rather expensive here and people are not treating their gas dependence with enough urgency yet. The city is surrounded by flat country side with lots of wind mills and solar installations. Yet most apartment buildings in the city are still gas heated. Mine is no exception. I have to pay into fueling the gas boiler every month to the extent of about 150ish euro per month. Down from 250ish during the worst of the aftermath of the Russian gas pipeline shut down. I'd love my building to be switched to a heat pump. That's 1800 euro down the drain every year. I'll take a 30-40% cut on that please. It's technically very feasible and measured over 10-20 years, there should be a very clear financial payoff. Done right it should pay for itself probably within a decade. The building has about 20 apartments. Monthly gas bills are 2.5K based on yearly statements. Or about 30K. All out the chimney. That's one hell of a budget to tackle a bit of energy efficiency in the building. But this is where Germany is its own worst enemy. We're talking a lot of vested interests. Nimby's somehow blocking the notion of literally saving money (as opposed to setting it on fire and chucking it out the chimney). A lack of incentives. A lot of bureaucracy, etc. Even the decision to stop building completely new buildings without a gas connection is somehow controversial in this country where gas is expensive. It is in the middle of a years long gas crisis of its own making and it can't get the decision to stop hitting itself with the proverbial hammer actioned. A bit of system thinking could turn this around relatively quickly though. For example starting to think of this as investments with clear ROI as opposed to just cost would change the decision making and could also open up a lot of financing. Banks love investments with predictable ROI, for example. And Germany has an excellent credit rating. However, Germany is grid locked on an irrational fear of financing and debt. It has very little of it relative to e.g. the US or even most other EU countries. It also has huge infrastructure problems. Addressing those requires investment. Investment requires financing. Investments have ROIs which should enable said financing. But that's where penny pinching politicians seem to have a mental block confusing investments for cost and consistently opting to "save cost" rather than to invest. And generally not seeing the forest for the trees. But the picture is pretty clear. Switch most house holds to heat pumps while at the same time investing in cables, on/off-shore wind, a bit of solar on the side. With lots of battery storage. Etc. would do wonders for the amounts of gas it has to import at great cost. The country has millions of apartment blocks like mine using about 2-3x more energy than needed for heating. Almost all of it in gas form. A program to change those buildings could be executed in 10-15 years and break even in about the same time. It would result in many billions of savings in gas imports per year. That's the few percent of GDP that makes the difference between growth or recession. Germany has been in and out of recession for the last few years. Even powering that exclusively with gas fired electricity plants would yield substantial savings. And it already is transitioning to a grid that is mostly not gas powered. This should be a no brainer. But it somehow isn't. And that's just domestic heating.
- jokoon 6mo agoThanks nuclear for subsidizing renewables
- fleroviumna 6mo ago[dead]
- raincole 6mo agoYou have to ask how much of it is subsidized, otherwise it's pointless. It's very easy to 'decouple' electricity price from natural gas if the government simply pays it with tax money (which is how it works in many asian countries where the electricity prices are less than one third of EU level.)