After the announcement of reducing the power capacity, first slight price signals can be observed.
In the last few weeks, base prices at EEX’ energy future market for 2016 showed an unsuspected volatility. Especially prices this week (w 44) increased by almost 5 % compared to the low. This development could be caused by chart-motivated reactions on the price trend, but fundamental data imply that this is rather a price signal due to the capacity reduction.
Yet a reversion of the price trend is not to be expected on the long run.
Background
The German energy market is characterised by explicit overcapacities. Those are mainly determined by conventional power plants. Current political decisions tend to reduce those overcapacities by regulating the energy market.
Together the German Ministry of Economics and Technology (BMWi) and energy corporation RWE, Vattenfall and Mibrag agreed to step-wise shut down lignite power plants from 2016 on. Overall those power plants have a capacity of 2700 MW. Each power plant will be transferred into a “contingency reserve” and then shut down completely after 4 years.
