The World's #1 Renewable Energy Network for News, Information, and Companies.

Wind Blows German Power Swings to Five-Year High

Wind Blows German Power Swings to Five-Year High

Germany is getting more power than ever before from sources dependent on wind and sunshine, pushing short-term price swings to the biggest in five years and boosting volume as utilities increase trading.

The gap between the highest and lowest price over two months for electricity deliverable the next day widened to the most since December 2007 through yesterday, according to broker data compiled by Bloomberg. German wind output peaked at a record 23,331 megawatts on Jan. 31, enough to supply 46 million homes. That compares with an average of 5,079 megawatts during 2012, data from European Energy Exchange AG on Bloomberg show.

Chancellor Angela Merkel's government is trying to push the proportion of German power produced by renewable sources to 35 percent by 2020. Solar and wind generation jumped 80 percent over the past three years, damping prices on sunny, gusty days and boosting them when natural gas or coal plants are required to offset shortfalls. Intraday volume on the EPEX Spot SE exchange in Paris rose more than 11-fold over the past five years as traders focused on near-term contracts for speculative buying and selling.

"Renewable generation has brought some volatility to the market," Johannes Teyssen, EON SE's chief executive officer, said on a Jan. 30 conference call. "We have the possibility to earn some extra money."

Germany's biggest utility lost 66 million euros ($88 million) from buying and selling energy commodities for its own account in the nine months through September last year, on an earnings before interest, tax, depreciation and amortization basis. The performance cut EON's total income for the period to 8.82 billion euros, up 35 percent from a year earlier, according to its Nov. 13 earnings statement.

Replacing Nuclear

Day-ahead electricity in Germany traded in a 109.50 euro ($146.31) range from Nov. 23 to Feb. 18, the biggest 60-day price swing since the two months ending Dec. 27, 2007, according to broker data compiled by Bloomberg. Baseload electricity, for supplies delivered around the clock, fell as low as minus 48 euros a megawatt-hour on Dec. 25 and was at 44 euros at 2:42 p.m. Berlin time today.

Germany is expanding its output from climate-dependent renewable energy sources to replace nuclear power that will be phased out by 2022. Installed solar and wind capacity was about 64 gigawatts at the end of 2012 compared with 35.6 gigawatts at the end of 2009, according to a Bloomberg Industries analysis of data from the German Environment Ministry and wind lobby Bundesverband WindEnergie e.V. Renewable plants provided enough electricity to meet about 22 percent of total demand last year, according to BDEW, a Berlin-based utility lobby group.

Higher Bills

The electricity bill for German households with power consumption of 3,500 kilowatt-hours a year will rise to the highest in at least 15 years to pay for the increased generation from wind and solar, according to BDEW. The average price for a private three-person household will increase to 28.50 euro cents a kilowatt-hour this year from 25.89 cents in 2012 and 13.94 cents in 2000, the lobby group estimates.

Germany guarantees operators of wind and solar plants a fixed income for the electricity they generate and smaller users such as households pay for any discrepancy with market prices through a so-called renewable energy fee. The levy, for consumers of less than 1 gigawatt-hour a year, will rise to 5.277 euro cent a kilowatt-hour this year from 3.592 cents in 2012, according to BDEW.

Better Opportunities

It's possible for wholesale electricity prices to fall below zero if supply exceeds demand, prompting utilities to pay consumers to take delivery because power, unlike other commodities, can't be stored. Day-ahead prices turned negative for the first time in December amid above-average wind output, low demand and mild temperatures for the season.

Warmer-than-usual weather damped average hourly demand to 40.9 gigawatts on Dec. 25, according to data from European power grid operator group Entso-e, compared with a mean of 44.2 gigawatts during the last week of the year. Temperatures in Germany rose to a maximum of 18 degrees Celsius (64 Fahrenheit) in Stuttgart on Jan. 25, according to Deutscher Wetterdienst. That was the highest temperature on Dec. 25 since 1961, when the office started recording the data.

RWE AG, Germany's second biggest utility, "benefited from a substantial improvement" in the performance of its energy trading activities in the nine months through September, according to its Nov. 14 earnings report. The Essen, Germany-based company didn't disclose financial details.

'Bearish Weather'

Cumulus Energy Fund, a hedge fund with $176 million under management, surged 39 percent in December after predicting the slump in near-term prices that month, it said in an investor letter. The fund boosted its returns when "extremely bearish weather" caused the collapse in German spot prices over the holiday period, London-based Chief Investment Officer Peter Brewer wrote.

Intraday volume on EPEX Spot, the biggest exchange for short-term German power trading, climbed to 15.8 terawatt-hours last year from 1.4 terawatt-hours in 2007, according to a company statement on Jan. 8. Total electricity traded on the bourse, which covers contracts for as long as one day ahead in France, Germany, Austria and Switzerland, increased by 8 percent in 2012 to a record 339 terawatt-hours.

"With more renewable generation increasing volatility we are concentrating more people and more effort into intraday trading," Stefan Dohler, head of asset optimization and trading at Vattenfall AB, Germany's third-largest power producer, said in an interview in Essen on Feb. 5.

Vattenfall made a profit from trading and optimizing the use of its power plants last year, Thorsten Ziegler, a Vattenfall spokesman said yesterday by e-mail. He declined to provide financial details.

Next-Year Contract

In addition to the one-day market, utilities, banks and hedge funds trade electricity several years ahead. Germany's next-year contract is the most liquid in Europe and is used as a benchmark throughout the region. As renewable energy floods the market and increases price swings for next-day and intra-day electricity, it's having the reverse impact on longer-dated contracts as the boom in green power sources creates a surplus. Germany has a buffer of about 5,000 megawatts, Vattenfall's Dohler said.

Price swings in the next-year contract, as measured by 30-day historical volatility, slumped to 5.11 percent on Dec. 21 from 17.14 percent on March 19, according to EEX data on Bloomberg. The measure has recovered this year and was at 15.49 percent yesterday. Year-ahead trading fell 36 percent to 384 terawatt-hours on EEX in 2012 compared with a year earlier, the bourse said by e-mail.

Price swings in near-term electricity contracts may become more pronounced as daily fluctuations in the weather keep supplies in flux, Henrich Quick, an analyst at Poyry Oyj in Dusseldorf, said by phone.

"There used to be 50 extreme hours in a year and by 2020 it will be the new normal where you have 200 to 300 freaky hours," he said.

Copyright 2013 Bloomberg

Lead image: German Reichstag dome with the German national flag, via Shutterstock



Greenpeace Raises Pressure on Internet Companies to Go Renewable

Andrew Burger, Contributor For at least four years, Greenpeace has been raising public awareness and putting pressure on the world's largest data and cloud computing center providers to fuel their operations with clean, renewable power. In May, Gree...
A biogas plant concept from Weltec Biopower

Europe Versus Renewable Energy?

Tildy Bayar, Contributor Wednesday morning’s 'Regulation and the Marketplace' panel discussion at POWER-GEN Europe in Amsterdam got off to a lively start with a presentation from Randy Mott, president of Polish biogas- and geothermal-bas...
Uzbekistan flag and map

Uzbekistan’s Ambitious Wind Power Target Signals New Energy Politics

Linas Jegelevicius, International Correspondent After rolling out its renewable energy strategy through 2019 in April, the Central Asian Republic of Uzbekistan has set its sights on ambitious goals: Build three 100-MW solar power plants and generate more than 1 trillion...
Wind turbines dusk

India's Solar Embrace Is Leaving Wind Power in the Shade

Anindya Upadhyay, Bloomberg

India is set to add more solar capacity than wind power for the first time as Prime Minister Narendra Modi looks to harness the sun’s rays to curb energy shortages.


Volume 18, Issue 3


To register for our free
e-Newsletters, subscribe today:



Bankability and Support Mechanisms for Renewable Energy Projects

Setting appropriate legal and regulatory frameworks is essential for the...

CRGM - Online Training on Grid Integration of Renewable Energy

The training is useful for persons who would like to learn more about me...

Applying Renewable Energy - Online Training

RENAC Online offers a selection of courses on a wide variety of renewabl...


Meteorological Technology International Magazine - SENSORS AND SENS...

Over the past 10 years, these sensing technologies have spread tre...

SunEdison Expands Residential Market Offerings with New PPA, Sales ...

SunEdison has largely focussed on the commercial and utility-scale solar...

Are You Ready for a Natural Disaster?

Guest post by Jenna Clarke  Living in the Shenandoah Valley of Virg...


Tweet the Editors! @megcichon @jennrunyon


Renewable Energy: Subscribe Now

Solar Energy: Subscribe Now

Wind Energy: Subscribe Now

Geothermal Energy: Subscribe Now

Bioenergy: Subscribe Now