Why Germans won’t heat their homes even with free electricity?

This is a translation/guest post by Riku Merikoski. The original can be found here (in Finnish). All mistakes due to translation are my fault. 

On Monday 10th February 2020 something historical happened. For the first time, the market price of electricity fell below zero in Finland. While -0.2 € per megawatt hour (or -0.02 cents / kWh) is not dramatically different from earlier lows of 0.1 €/MWh, going negative is a strong symptom of the sickness that ails our electricity markets. Governments have created a situation where it is not worthwhile to use low carbon electricity even if it is free from time to time.

There are several reasons for the negative prices, but the main driver is the reckless support-policy for renewable electricity in Germany and Denmark.

In 2017 the total subsidies paid for renewable electricity in Germany were around 26 billion euros, of which 8.5 billion was paid to wind producers. Most of the wind production in Germany gets high feed-in-tariffs regardless of the market price of electricity. Only turbines built in 2016 or later take even a small hit to their revenues if prices go below zero, and more than 75 % of the production capacity was built before that.

As a result, Germany and Denmark have experienced negative prices already for years, and this time they remained negative for six hours. Strong imports from Denmark and Germany during the night were among the main causes for pushing Finnish prices below zero.

Germany had around 104 TWh of wind production in 2017. Divided to that amount, the 8.5 billion euros in tariffs means a tariff of around 82 €/MWh. Just a few years ago, new wind projects got a higher tariff of around 80 €/MWh for the first five years, and a lowered tariff for the next 15 years, which is most of their practical operational lifetime. Offshore wind had even higher tariffs, which increases the average wind tariff further. You can find out more about these numbers from the Bundesnetzagentur statistics.

Average onshore tariff is around 66 €/MWh and offshore tariff average is 159 €/MWh. There has not been much new onshore wind coming online during the last two years and just 2,000 MW of offshore wind, so the averages have not changed that much since 2017. The production for this day (10th February) was estimated to be around 40,000 MWh/h on average, meaning that almost 1,000,000 MWh of wind electricity was produced during the 24 hours. This means that roughly 80 million euros of wind tariffs were paid. On top of this, solar PV and bioenergy also got paid some tariffs, but during a windy winter day those are usually smaller amounts.

So is 80 million euros a lot or not? It’s a lot. The average market price for electricity in Germany was 8 €/MWh and total demand was around 1,500,000 MWh (1.5 TWh). During daytime electricity demand is higher and so is the market price, so the total market price for the 24 hours is roughly 15 million euros. The value of the wind production of around 1,000,000 MWh was roughly 8 million euros. The sources for all these numbers are from EEX and Entso-E.

Let’s take a moment to contemplate the numbers once more:

German electricity consumers paid 80 million euros in tariffs to get 8 million euros worth of wind power to the marketThe total value of all electricity consumed in that day was 15 million €.

There is way more. Read the whole.