"It has shown how dependent we are on neighboring countries"
Through a malfunction, electricity prices at the EPEX exchange reached extreme heights last week. For consumers with dynamic electricity tariffs, prices multiplied at certain times. The damage is manageable, according to energy market expert Tobias Federico from Montel - Energy Brainpool in an interview with ntv.de, but it's important to draw lessons from the malfunction.
ntv.de: What happened last week?
Tobias Federico: In a nutshell, it was this: One of the major trading platforms for electricity in Europe, the EPEX Spot, calculated prices for deliveries the next day as if there was no import or export between the countries. This is called "decoupling" - the markets being decoupled. The result were extremely different prices in Europe, with Germany standing out in particular, with very high prices for a short period of time.
To understand this, could you briefly explain how electricity trading works?
The European electricity market is organized so that algorithms match supply and demand on digital trading platforms and then publish prices. This happens first for a specific delivery country, followed by a second calculation step for import and export volumes between countries. This means that electricity is supplied from countries where we have a very low electricity price to countries where the price is high. As long as the import and export capacities - the electricity highways between countries - are sufficient, a harmonious European electricity price results. If there are bottlenecks in cross-border transport capacities, electricity prices remain different in the various countries. This procedure runs daily, always one day before the delivery of the electricity. Last week, the second part, the import and export volumes, were not taken into account. That was the "decoupling".
How did this affect electricity prices in Germany?
Many companies that offer dynamic electricity tariffs to households also trade on the EPEX Spot. These are tariffs where the price for consumers changes hourly based on developments at a specific reference trading place. Last week, some electricity customers in the app of their provider saw a price of 2.30 Euro per kilowatt hour between six and seven a.m. on a Wednesday.
Was this the first time this happened?
There have always been problems with such algorithms. Normally, the calculation is simply repeated. The special thing about this case is that the error could not be corrected in time.
How do you assess the risk of this happening again?
The EPEX Spot and its predecessor companies with the same trading algorithm have existed for about 24 years. I can remember three events where there were real problems. That's a very low failure rate. Correspondingly, the risk of recurrence is also small.
What does this mean for private consumers with a dynamic electricity tariff? In the worst case, they lost a few Euros that day.
For industrial electricity consumers, it depends on whether they have a direct exchange connection or buy their electricity through intermediaries, and whether they buy electricity at only one trading place. Few industrial companies were affected. But some had real problems. There are reports that a steel mill shut down production for a day because the electricity was too expensive.
With this event, one could have prevented the story as a presumably unique occurrence with limited damage. Or is there more to it, according to their opinion?
It was a singular event. Some found it painful, but the impacts were limited. Interesting it was for another reason: It showed us how dependent we are on our neighbors from an import and export perspective.
And is that a problem? It seems to work fine in normal circumstances.
Long-term scenarios show that we must expect similar fluctuations in the future if we continue to build extremely fluctuating renewable power generation capacity at an unequal rate to our neighbors' import and export capacities. Or if we build too few backup power plants that can intervene in emergencies. This power grid fault took us on a kind of time travel into this long-term scenario. I find that intriguing.
An answer to these fluctuations are exactly these dynamic power tariffs, which are supposed to encourage customers to consume electricity as much as possible when a lot of solar and wind power is generated. The washing machine should therefore not run in the evening but be set on a timer for the next morning. If everyone did that, price peaks would be significantly reduced. Is such an effect already observable?
The example of the washing machine is nice. But if one looks at how much a washing machine consumes and how many households have washing machines, it is marginal compared to what a pumped storage power plant can store and generate. There are a few industrial customers who can adapt their power consumption to these fluctuations. But most industrial processes are not so flexible. The potential of these so-called load shifts is correspondingly limited to about ten to fifteen percent of the power demand.
Which other levers do we need to pull to prevent such price surges in the future?
On the one hand, we need a storage system that stores electricity at low prices and then feeds it back into the grid at high prices. Battery storage will be part of this, but also electrolysis plants, which produce hydrogen or generate electricity from hydrogen when prices are high. In the 2040s and 50s, up to half of our power demand could be designed to react to price fluctuations, that is, be able to respond to price fluctuations.
In the past few days, it was often heard that this decoupling has revealed the German energy transition as a kind of jerry-built structure. Because it was evident that the high share of renewable energy generation in Germany is only sustainable if neighboring countries with atomic or coal power help to compensate for the fluctuations. Do you agree with this assessment?
In rare cases of what is called a "Dark Low Pressure System," when neither the sun shines nor the wind blows, we are dependent on our neighbors. The same applies when France is hit by a cold wave. Then we are our biggest neighbors, after all. I believe physically, we could manage without imports and exports. commercially, it's different. Without imports and exports, we would have higher price levels and extreme fluctuations. commercially, we need this European mix. But that's of course a give and take. The French also profit from the low German prices during the day. In the morning and evening, the French earn from the high prices in Germany. Germans earn, when the electricity price here drops partially below zero, while it would be 100 Euro per Gigawatt-hour in France without imports, as we saw last week.
With Tobias Federico spoke Max Borowski
- Amidst the ongoing energy transition, it's crucial to consider integrating renewable energies more effectively into power grids to mitigate the impact of unforeseen events like the EPEX exchange malfunction on electricity prices.
- As the reliance on renewable energies increases, ensuring a robust storage system capable of storing electricity at low prices and releasing it during peak hours becomes essential to prevent price surges and maintain a stable electricity market.
