German coal plants benefit from record gas prices despite higher CO2 costs - analysis
Clean Energy Wire
The German wholesale power price more than tripled in 2021 to an average of 97 euros per megawatt-hour (MWh) compared to the previous year, pushing it to the highest level in 20 years, the Institute of Energy Economics at the University of Cologne (EWI) finds in a new analysis. While 2020 saw lower-than-normal demand for electricity, natural gas and hard coal and therefore cheaper power, the economic recovery in 2021 meant skyrocketing prices for energy. “Against this background and as a result of high CO2 prices, electricity prices then rose particularly sharply last year -- especially from July onwards,” Eren Çam of the EWI said in a press release. Natural gas cost as much as 150 euros/MWh and prices for imported hard coal prices also increased (to over 30 euros/MWh) due to higher demand in coal-fired power and supply bottlenecks. Hard coal prices were driven up by natural disasters in China, Australia and the U.S., the EWI says. Despite a considerable rise in the price for CO2 emission allowances under the European Emission Trading scheme (EU ETS), up from around 33 euro per tonne CO2 to almost 90 euros at times, this was more than compensated by the increase in natural gas costs, so that coal-fired power stations were more often used in 2021.
Whether electricity prices will remain at this high level in the short term is likely to depend on developments in the gas market. Cold weather in January and February could exacerbate the already high prices, while the role of the controversial gas pipeline Nord Stream 2 and the developing crisis on the Russian-Ukrainian border are causing additional uncertainty.