Green PPAs are location advantage for industry in Germany – Covestro
The option to enter long-term power purchase agreements (PPA) is a location advantage for industry in Germany, said Klaus Schäfer, chief technology officer (CTO) at chemicals company Covestro, in an interview with WirtschaftsWoche. While his company buys most power at the European Energy Exchange (EEX), it has started to supplement this with contracts with green electricity suppliers that guarantee a fixed price. “In the U.S., such physical PPA contracts are not possible in many regions due to the network infrastructure there,” said Schäfer. Asked about power prices, he said: “We have the highest electricity prices in Asia and the lowest in the USA. Germany lies in between.” This was only the case because the company was exempt from paying the renewables levy – a surcharge power consumers pay to finance support for wind, solar and biomass. “If we had to pay the EEG levy in full, Germany would be the most expensive location.”
The power prices paid by industry are one of the most contentious aspects of Germany's energy transition and its economic impacts. Business lobby groups routinely call the price of electricity a central threat to industry competitiveness. But sweeping claims in this debate hide the fact that there is no single power price for industrial consumers, but instead an exceptionally broad range of prices. Due to a complex system of taxes and levies, they depend on how much electricity companies need, when they need it, how they source it, whether they compete with rivals abroad, and many other factors.
Many companies keep a keen eye on green power purchase agreements (PPA) in order to get a better handle on power prices. These contracts between a power generator and a consumer – for example, between a wind park and a factory – specify the terms for the sale of electricity and guarantee long-term price security. But the volume of new renewable energy projects backed by PPAs in Germany trails that of other European countries, partly because wholesale power prices are relatively low in the country.