A real shame that electricification / demand doesnt not seem to follow up.
I think better policy on this topic is needed, especially more flexible pricing schemes reflecting the new reality of mi-day summer solar. That, combined with a reduction in retail electricity prices wholesale, by lowering conterproductive taxes from an era before electrification was a major policy goal.
You really believe that an intermittent source of electricity in a market that requires a constant balancing of supply and demand is a reasonable approach? Yes, solar and batteries are being installed in record numbers but unless we have a revolution in battery technology, the lithium based battery will not be able to meet demand, especially grid scale storage for weeks.
Show me anywhere in the world where wiping and solar have become a major source for electricity and prices have not gone up?
What prices are we talking about? Wholesale prices are lower when you have renewables in the mix (as you always replace expensive marginal power with zero-prices renewables, when available). Whether that translates into lower retail prices is a more complicated question, subject to a lot of policy choices, and to a lot of lobbying by the distribution arms of the utilities.
Correlation is not causation. Retail prices and wholesale prices are unfortunately not really correlated (you need to add grid costs, distribution costs and taxes on top of the wholesale price of electricity) and renewables have been pushed in markets that already tend to be densely populated, where distribution and grid are expensive. Plus the whole seesaw of covid then the war in Ukraine which boosted gas prices in Europe, leading to higher prices (as gas still tends to be the marginal price). Note also that large industrial players do have access to wholesale prices and/or to renewable PPAs - you don't hear Google, Microsoft of BASF complaining about the price of electricity (BASF complains about the price of gas, but they have access to ultra cheap electricity thanks to their offshore wind PPAs, for instance)
Why are German industries shutting down and moving out of Germany?
Shutting down their nuclear plants was one of the worst decisions any country has made about their energy future. Europe is in a tailspin because of green energy policies. You do read the news, tight?
What did the Norway energy minister say, “It’s a shit situation “
German industry is moving because of high natural gas prices, not because of high power prices.
Sometimes, it's even more cynical than that - the companies that have hedged themselves against high energy prices find it more profitable to sell their energy (which they have acquired at a lower price thanks to long term contracts or good hedge contracts) rather than use it for their normal activity. They make profits, and still close their factories, blaming high energy prices rather than their cynical short term profit making strategies.
As to Norway, it's a good example of the bad faith politics that go around energy. During the last bout of high power prices in Germany, it was attractive for Norwegian companies (mostly state-owned Statkraft) to sell to Germany, which naturally increased local wholesale power prices a bit. Normal arbitrage. But politicians in Norway used that (short term) episode to blameEuropean markets for higher power prices in Norway - even though, please get that, Norwegian retail consumers are protected anyway from these increases in wholesale prices (By statkraft itself, which still made more money from their sale than covering the difference for consumers cost them). So a behavior that allowed Norway as a while to earn more money was somehow turned into an episode where norwegians were screwed by Europe.
There's a lot of bad faith in politics in general, but the complexity of energy makes it easy to make up blatant lies that ordinary people do not see as lies.
You don't believe me, but the closure of German nuclear plants did not lead to any price increases. As a fun factoid, please note that french nuclear production has gone down more than German nuclear production since Fukushima... So if any nuclear producer is to blame for higher prices, it is EDF
The Energiewende is a disaster, you are witnessing a dismantling of the major industrial power house in Europe.
Germany carbon emissions have gone up significantly since they shut down their nuclear plants. How is that green? You are making yourself more dependent on China who burns more coal,and has more CO2 emissions than any country on the planet. How is that green?
You’re mining 500 tons of rock for one EV battery. How is that green?,
I see that you are quite fluent and post a lot on Substack, but I have to believe that your biases have blinded you to the truth. The pursuit of RE has primarily caused the price increase in Germany and the rest of Europe. I am assuming you are in Europe, and pay more than twice the average of the USA.
The French nuclear fleet has saved Europe from even higher electricity prices. France’s fleet of 56 nuclear power plants was 3 times as big as Germany had. They only temporarily shutdown 12 of them to conduct inspections for stress corrosion. I don’t believe your fun factoid. Even if it’s true, you cannot blame your troubles on EDF.
Germany has roughly 100 GW in peak demand and it has over 200 GW of supply, half RE, half fossil. You’re basically paying to maintain two grids, one that is always is standby waiting to make up for the daily gaps in RE. Thats the main reason your “energy prices” are so high.
Here’s an in depth article about the self made disaster that befalls the EU
“On Monday, Mario Draghi, the EU economic guru and former European Central Bank chief, offered a similarly dire message, using elevated energy bills to make his case for a massive overhaul of how Europe does business.”
I should expand my comment on gas prices impacting electricity prices. In Australia, base load is provided by coal fired power plants, which are in the process of being phased out and gas fired generators. Gas fired generators are deemed best suited to quickly meet shortfalls in wind and solar generation and therefore set the wholesale price in such circumstances.
A very interesting article and somewhat contrary to much of the negativity regarding renewables I have been reading over the past year. However, you have not provided comment on electricity prices paid by consumers apart from noting negative pricing is occuring in markets as a consequence of surplus electricity.
My experience in Australia, which has very high penetration of renewables, is that the latter is not translating into lower electricity prices, and in fact the state with the highest penetration of renewables (South Australia) has the highest electricity prices. In part this seems to be due to high gas prices impacting wholesale prices. This is in part being addressed through the large number of big batteries being installed, in line with your analysis, and it has also prompted a review of whether the electricity market in Australia is still fit for purpose.
Another factor is the very high cost of connecting dispersed solar and wind farms to the existing grid. All of the above has prompted a push towards nuclear energy from the opposition party in Australia. Independent economic analysis has shown that the proposal would reduce electricity prices but as you might expect the analysis while sound on one level, is fraught with assumptions and has been met with a frenzied response.
Interested in your thoughts or comment on any or all of the above.
There's indeed a distance between wholesale prices and retail ones. It is possible to have a retail contract that is linked to wholesale prices, but that can be quite dangerous (as consumers in Texas saw not long ago when ice brought down part of the grid and power plants and prices peaked for a whole week-end - the bill for the week-end for several years' worth of 'normal' retail prices). Otherwise retail prices are often regulated and the link between immediate wholesale prices (or even with average wholesale prices) is not obvious - this is one of the remaining sources of profits for utilities (at least their distribution arms) and they are not keen on full transparency...
Also, you have grid fees and taxes and these have often been jacked for good and bad reasons.
It's not a great thing for producers, obviously, but it is attractive to consumers if they can take advtange of it. It's just a signal that we don't want more production at that time, and want more demand then. Anybody with a profitable but interruptible activity that requires energy should be able to take advantage of that. Ultimately that will lead to a new equilibrium that allows flexible demand to take advantage of times when there is plenty of electricity available. Some of it will be storage that just allows to move production by a few hours, but some of it will be new (and smarter) economic activity.
Also, remember that negative pricing mostly comes because some inflexible plants cannot stop easily and would rather pay for someone to take their production than stop. These plants (mostly the baseload coal and nuclear plants) will inevitably have to close down. Renewables can easily be stopped. If you have lots of renewables but no baseload you'll have prices at or close to zero, but not negative.
A real shame that electricification / demand doesnt not seem to follow up.
I think better policy on this topic is needed, especially more flexible pricing schemes reflecting the new reality of mi-day summer solar. That, combined with a reduction in retail electricity prices wholesale, by lowering conterproductive taxes from an era before electrification was a major policy goal.
Cheers, and happy new year.
You really believe that an intermittent source of electricity in a market that requires a constant balancing of supply and demand is a reasonable approach? Yes, solar and batteries are being installed in record numbers but unless we have a revolution in battery technology, the lithium based battery will not be able to meet demand, especially grid scale storage for weeks.
Show me anywhere in the world where wiping and solar have become a major source for electricity and prices have not gone up?
California
Germany
Australia
UK
Hawaii
What prices are we talking about? Wholesale prices are lower when you have renewables in the mix (as you always replace expensive marginal power with zero-prices renewables, when available). Whether that translates into lower retail prices is a more complicated question, subject to a lot of policy choices, and to a lot of lobbying by the distribution arms of the utilities.
So Jerome, you really can’t answer my question, can you?
Prices go up everywhere when solar and wind are added the grid.
Correlation is not causation. Retail prices and wholesale prices are unfortunately not really correlated (you need to add grid costs, distribution costs and taxes on top of the wholesale price of electricity) and renewables have been pushed in markets that already tend to be densely populated, where distribution and grid are expensive. Plus the whole seesaw of covid then the war in Ukraine which boosted gas prices in Europe, leading to higher prices (as gas still tends to be the marginal price). Note also that large industrial players do have access to wholesale prices and/or to renewable PPAs - you don't hear Google, Microsoft of BASF complaining about the price of electricity (BASF complains about the price of gas, but they have access to ultra cheap electricity thanks to their offshore wind PPAs, for instance)
You still haven’t answered the question.
Why are German industries shutting down and moving out of Germany?
Shutting down their nuclear plants was one of the worst decisions any country has made about their energy future. Europe is in a tailspin because of green energy policies. You do read the news, tight?
What did the Norway energy minister say, “It’s a shit situation “
https://asiatimes.com/2024/11/germany-closing-factories-at-home-opening-them-in-china/#:~:text=Rising%20energy%20costs%20and%20regulatory,fallen%20by%20more%20than%209%25.
German industry is moving because of high natural gas prices, not because of high power prices.
Sometimes, it's even more cynical than that - the companies that have hedged themselves against high energy prices find it more profitable to sell their energy (which they have acquired at a lower price thanks to long term contracts or good hedge contracts) rather than use it for their normal activity. They make profits, and still close their factories, blaming high energy prices rather than their cynical short term profit making strategies.
As to Norway, it's a good example of the bad faith politics that go around energy. During the last bout of high power prices in Germany, it was attractive for Norwegian companies (mostly state-owned Statkraft) to sell to Germany, which naturally increased local wholesale power prices a bit. Normal arbitrage. But politicians in Norway used that (short term) episode to blameEuropean markets for higher power prices in Norway - even though, please get that, Norwegian retail consumers are protected anyway from these increases in wholesale prices (By statkraft itself, which still made more money from their sale than covering the difference for consumers cost them). So a behavior that allowed Norway as a while to earn more money was somehow turned into an episode where norwegians were screwed by Europe.
There's a lot of bad faith in politics in general, but the complexity of energy makes it easy to make up blatant lies that ordinary people do not see as lies.
You don't believe me, but the closure of German nuclear plants did not lead to any price increases. As a fun factoid, please note that french nuclear production has gone down more than German nuclear production since Fukushima... So if any nuclear producer is to blame for higher prices, it is EDF
The Energiewende is a disaster, you are witnessing a dismantling of the major industrial power house in Europe.
Germany carbon emissions have gone up significantly since they shut down their nuclear plants. How is that green? You are making yourself more dependent on China who burns more coal,and has more CO2 emissions than any country on the planet. How is that green?
You’re mining 500 tons of rock for one EV battery. How is that green?,
I see that you are quite fluent and post a lot on Substack, but I have to believe that your biases have blinded you to the truth. The pursuit of RE has primarily caused the price increase in Germany and the rest of Europe. I am assuming you are in Europe, and pay more than twice the average of the USA.
The French nuclear fleet has saved Europe from even higher electricity prices. France’s fleet of 56 nuclear power plants was 3 times as big as Germany had. They only temporarily shutdown 12 of them to conduct inspections for stress corrosion. I don’t believe your fun factoid. Even if it’s true, you cannot blame your troubles on EDF.
Germany has roughly 100 GW in peak demand and it has over 200 GW of supply, half RE, half fossil. You’re basically paying to maintain two grids, one that is always is standby waiting to make up for the daily gaps in RE. Thats the main reason your “energy prices” are so high.
Here’s an in depth article about the self made disaster that befalls the EU
“On Monday, Mario Draghi, the EU economic guru and former European Central Bank chief, offered a similarly dire message, using elevated energy bills to make his case for a massive overhaul of how Europe does business.”
https://www.politico.eu/article/europe-energy-bills-germany-brussels-pipeline-prices/
But renewables aren’t zero-priced… they are zero-fuel cost but guaranteed prices per MWh generated ain’t they? Even if it constrained off the grid.
California
https://www.eia.gov/electricity/data/browser/#/topic/7?agg=1,0&geo=g002i41h1324&endsec=g&linechart=ELEC.PRICE.US-ALL.M~ELEC.PRICE.NY-ALL.M~ELEC.PRICE.IL-ALL.M~ELEC.PRICE.OH-ALL.M~ELEC.PRICE.MN-ALL.M~ELEC.PRICE.FL-ALL.M~ELEC.PRICE.GA-ALL.M~ELEC.PRICE.VA-ALL.M~ELEC.PRICE.TN-ALL.M~ELEC.PRICE.TX-ALL.M~ELEC.PRICE.AZ-ALL.M~ELEC.PRICE.NV-ALL.M~ELEC.PRICE.CA-ALL.M&columnchart=ELEC.PRICE.US-ALL.M&map=ELEC.PRICE.US-ALL.M&freq=M&start=200101&end=202410&chartindexed=2&ctype=linechart<ype=pin&rtype=s&pin=&rse=0&maptype=0
Take your pick
Industrial, commercial or residential prices
Look at Germany with its “zero prices renewables “
https://countryeconomy.com/energy-and-environment/electricity-price-household/germany#:~:text=Germany%2C%20the%20country%20with%20the,1.72%25%20since%20the%20previous%20semester.
I should expand my comment on gas prices impacting electricity prices. In Australia, base load is provided by coal fired power plants, which are in the process of being phased out and gas fired generators. Gas fired generators are deemed best suited to quickly meet shortfalls in wind and solar generation and therefore set the wholesale price in such circumstances.
A very interesting article and somewhat contrary to much of the negativity regarding renewables I have been reading over the past year. However, you have not provided comment on electricity prices paid by consumers apart from noting negative pricing is occuring in markets as a consequence of surplus electricity.
My experience in Australia, which has very high penetration of renewables, is that the latter is not translating into lower electricity prices, and in fact the state with the highest penetration of renewables (South Australia) has the highest electricity prices. In part this seems to be due to high gas prices impacting wholesale prices. This is in part being addressed through the large number of big batteries being installed, in line with your analysis, and it has also prompted a review of whether the electricity market in Australia is still fit for purpose.
Another factor is the very high cost of connecting dispersed solar and wind farms to the existing grid. All of the above has prompted a push towards nuclear energy from the opposition party in Australia. Independent economic analysis has shown that the proposal would reduce electricity prices but as you might expect the analysis while sound on one level, is fraught with assumptions and has been met with a frenzied response.
Interested in your thoughts or comment on any or all of the above.
Murray Arthur-Worsop
There's indeed a distance between wholesale prices and retail ones. It is possible to have a retail contract that is linked to wholesale prices, but that can be quite dangerous (as consumers in Texas saw not long ago when ice brought down part of the grid and power plants and prices peaked for a whole week-end - the bill for the week-end for several years' worth of 'normal' retail prices). Otherwise retail prices are often regulated and the link between immediate wholesale prices (or even with average wholesale prices) is not obvious - this is one of the remaining sources of profits for utilities (at least their distribution arms) and they are not keen on full transparency...
Also, you have grid fees and taxes and these have often been jacked for good and bad reasons.
you mention negative power prices - ( how ) is that a good thing?
It's not a great thing for producers, obviously, but it is attractive to consumers if they can take advtange of it. It's just a signal that we don't want more production at that time, and want more demand then. Anybody with a profitable but interruptible activity that requires energy should be able to take advantage of that. Ultimately that will lead to a new equilibrium that allows flexible demand to take advantage of times when there is plenty of electricity available. Some of it will be storage that just allows to move production by a few hours, but some of it will be new (and smarter) economic activity.
Also, remember that negative pricing mostly comes because some inflexible plants cannot stop easily and would rather pay for someone to take their production than stop. These plants (mostly the baseload coal and nuclear plants) will inevitably have to close down. Renewables can easily be stopped. If you have lots of renewables but no baseload you'll have prices at or close to zero, but not negative.