the electricity market in disarray

Electricity producers will long remember Easter Monday 2020. With the exception of the Iberian Peninsula and Italy, electricity prices were negative for most of the day on April 13 in several European countries, including in France. Clearly, producers have been forced to pay their customers to get rid of their electrons, much like what happened on the US oil market a few days ago.

This situation has occurred on several occasions since the end of March, mainly in Germany, but also throughout the Benelux, with amounts of ” negative pricevery important: up to –80 €, or even –115 € per megawatt / hour (MW / h). To give an order of magnitude, EDF sells nuclear electricity to its competitors at € 42 per MW / h.

German renewables fleet running at full speed

The exceptional circumstances largely explain the current situation. There is a large supply of electricity, with weather conditions that have allowed wind turbines and solar power plants to run at full speed. At the same time, demand fell by around 15-20% in Europe in a matter of days, with the shutdown of many industries. Never seen.

Normally, negative prices are usually explained because it is more expensive to shut down a plant than to let it continue to produce. But this time, it is especially the huge fields of renewable energy in Germany that are pointed out. ” Installations that were created before 2016 benefit from the old support mechanism. Whatever the market prices, they benefit from a purchase guarantee at a level fixed by the State and therefore have an interest in continuing to producee “, underlines Antoine Guillou, economist at the French Union of Electricity (UFE), who speaks of a” system design error

Since then, the mechanism has been reformed and new wind turbines or solar power plants can be disconnected from the grid if electricity prices get negative for too long.

Decreasing revenues, increasing charges

In France, the new support mechanism for renewable electricity production, in force since 2016, takes the form of additional remuneration, which varies according to the price of electricity on the wholesale market. As with the feed-in tariff system, it is funded by the trust account ” energy transitione ”, whose revenue comes from TICPE, the tax on petroleum products. Its amount is expected to reach 5.2 billion euros this year, half for wind and a quarter for solar, according to the Commission for Energy Regulation (CRE). But it is not sure that this is enough.

The additional remuneration paid to producers varies according to market prices. The lower these are, the greater the difference to be paid by the state. “ The bill is likely to be salty, because since the start of the crisis, electricity prices have been halved, falling to 20 € per megawatt / hour, against 40 € before the crisis “Explains Clément Le Roy, consultant at Wavestone.

An additional cost for the State

According to CRE, a variation of one euro up or down during a year on the wholesale markets, brings in or costs the State around 50 million euros. Potentially, the note could therefore be in the region of one billion euros, if the situation continues.

In addition, there is also the shortfall in TICPE, already estimated at 1.5 billion euros in 2020. “ Revenues for renewable energy will obviously be weakened “Explained the Minister of the Economy, Bruno Le Maire, before the senators on April 6, explaining that he would have to think” the system to be put in place in the aftermath of the crisis

To avoid malfunctions, it will also be necessary to strengthen the interconnection lines, stresses France Strategy, in a note published on April 21. ” Without them, Germany would probably have experienced blackouts “Recalls the organization attached to Matignon.

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