Both the negotiations on the German coalition agreement and the prices on commodity exchanges were very volatile in February 2018. PPAs are becoming increasingly attractive and the results of the tenders for renewable energies speak for themselves.
The ideas for a new edition of the Grand Coalition fall behind those of the Jamaica negotiations. Changes to the Renewable Energies Act and larger tender volumes will be unavoidable. Long-term Power Purchase Agreements (PPAs) could develop to be the main compensation form next to the EEG. After the earthquake in the Netherlands, the gas sector must adjust to further cuts in L-gas imports. The electricity prices at the long end go down according to political announcements to postpone a coal exit and due to lower coal prices.
Since the beginning of August 2017 the prices on the electricity and commodity markets have been breaking one record after the other. Is it eventually time to pop the corks and finally ring in the end of the lean times? Or is it barely a temporary anomaly? To find an answer, we investigate the causes of the current price development.
The electricity price, be it at the futures or the spot market, depends on several factors. Those include the (expected) demand, the available power plants (renewable and conventional) and the short-term fuel costs of the power plants used. The power plants along the upper part of the merit-order have the greatest influence on the electricity price, because they are needed to just meet demand. Generally, hard coal or gas-fired power plants are price-setting.
Natural gas can either be transported grid-bound via pipelines or liquefied as LNG. In order to increase the energy density, the gas is transported through the pipelines under high pressure (around 80 bar).
The influence of variable renewable energy sources (vRES) dominates the day-ahead market. The displacement of conventional power plants during high feed-in of vRES affects prices and generation volumes. For the Calendar Week 25 (19 – 25 June) it is analysed how conventional power plants need to adjust their scheduling because of the vRES feed-in.
In the procurement of gas some singularities have developed, which distinguish the gas market from other commodity markets. Import companies, for example, sometimes have very long-term contracts with gas producers (up to 20 years), a linkage to the oil price and the so called take-or-pay volumes or flexibilities with limits. This chapter aims to familiarize you with the terminology, to understand their meaning and to assess the consequences for the energy industry.