The wind boom causes electricity prices to fall in Germany and Denmark
More wind means less coal and above all less gas.
This is why the now infamous TTF, the future reference contract for methane in Europe, is in free fall: for most of yesterday it was traded at 56 euros/Mwh, down 13% compared to last Friday’s closing.
Most of the price is determined by Germany, the leading industrial power and obviously the leading European state in terms of energy consumption.
Only yesterday, according to the Wind Europe newspapers, 80% of German electricity was produced by wind turbines. An activity that on Sunday brought down the price of electricity to just 9.3 euros per megawatt hour, against the 145.5 euros paid in Italy due to the fact that here wind power accounts for only 13.6%. Denmark, thanks to wind power, produces as much as 138% of the electricity it needs. The Iberian Peninsula stops at 50%, while Austria is at 26.8% and France (strong in nuclear power) at 23.6%.
By virtue of these percentages, remaining at Sunday’s prices, we can see that electricity cost precisely 9.3 euros/Mwh in Berlin, 11 in Copenhagen, 22.1 in Madrid and Lisbon, 34.9 in Paris and 83 ,1 in Vienna.
At 11.00 yesterday morning, according to data from energy-charts.infoin the European Union out of 317,160 Mwh of electricity produced, as many as 78,500 came from wind, 62,300 from nuclear, 38,655 from gas, 27,424 from photovoltaics, 24,621 from coal, 21,600 from hydroelectric and 20,400 from lignite, much used in Germany and much contested by Greta Thunberg.
In practice, gas, Europe’s terror for much of 2022, is behind only a tenth of electricity production, even in the middle of winter.
The mild climate, windy especially in the countries kissed by the North Sea and the Atlantic Ocean, and a greater use of ultra-polluting raw materials such as coal and lignite have prompted a large part of the EU to find alternatives to methane, whose flow from Russia has collapsed by more than 80%.
Furthermore, Germany has set up two regasification terminals in record time, while LNG arrives in abundance from the USA and beyond, all topped off with over 80% full storage in the Old Continent. These are the reasons behind the strong and continuous decline in the price of the TTF which in the last month has lost 50% of its value, reaching a price not seen since the beginning of autumn of 2021.
However, the descent may not be infinite. There is some kind of minimum floor, below which the gas should not go down. A week ago Julien Hoarau, head of Engie EnergyScan, wrote on Twitter: “TTF prices continue to fall below 70 euros/MWh. While it should be close to coal’s switching range, mostly high wind generation is already limiting the output of only the most efficient coal-fired power plants in Germany, which could lower the price cap to 40-50 euros per megawatt hour ”. Therefore, there is a minimum price of around 60-65 euros below which the plants start to burn gas again, which also entails a lower cost in terms of purchasing certificates linked to emissions. Minimum price which, however, if the mild and windy climate allows it, can even drop to 40-50 euros, thanks to a greater production of wind energy.
A threshold that still remains twice the price of January 18 of 2 years ago, i.e. 17 euros per megawatt hour.
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