Germany energy market report January 2022 (2023)

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The year 2022 begins with the preparation of some legislative changes. On the one hand, the federal government wants to pass a package of laws to achieve the expansion paths of renewable energies, on the other hand, the EU taxonomy is currently being discussed. A reform of the electricity termination law is being planned.

Robert Habeck presents the opening balance for climate protection

In the opening speech of the Ministry of Climate Protection on January 11, 2022, Federal Minister of Economics Robert Habeck introduced his speech as follows: "We are starting with a drastic delay. Current climate protection measures are insufficient in all sectors. It is foreseeable that the climate targets for the years 2022 and 2023 will be exceeded. A number of measures are therefore necessary to counteract this. Figure 1 shows the necessary expansion paths for wind power and photovoltaics. The first legislative package will be passed by the cabinet in April (source:BMWI).

Figure 1: Development and perspectives of the expansion paths for onshore wind, offshore wind and PV (Source: Energy Brainpool according to AGEE-Stat - Working Group on Renewable Energy Statistics, 2022 [1] )

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The Federal Ministry for Economic Affairs and Climate would like to implement these immediate measures as soon as possible (source:BMWI):

EEG amendment: In order to achieve the goal of 80 percent green electricity by 2030, the bid amounts will be increased. The starting point is a gross electricity consumption of 715 TWh.
Solar power: The Solar Acceleration Package, a bundle of individual measures, is intended to promote solar power. These include better subsidy rates for new PV systems, higher tender volumes and an obligation for the PV industry to use as much roof space as possible for solar in the future.
Wind energy: In the case of wind energy, it is intended to accelerate the expansion process with a law of the terrestrial wind. For this purpose, an area of two percent is allocated exclusively to wind energy. This is four times the previous zone.
Electricity price reduction: From 2023, the EEG surcharge will be financed from the federal budget. The aim is to relieve consumers of electricity costs.
Industry climate protection contracts: The focus is on the legal and financial requirements of so-called climate protection contracts (“Carbon Contracts for Difference”). Reliable financing and investment frameworks should increase the planning security of companies.
Heating strategy: The aim is to generate 50 percent of the heat in a climate-neutral manner by 2030. Among other things, the Building Energy Act will be revised so that from 2025 all newly installed heating systems will be based on at least 65 percent renewable energy.
Hydrogen strategy: The Stoplight Coalition wants to increase the national hydrogen expansion target for 2030 from 5,000 to 10,000 MW. configured programs.

Shared views on the EU taxonomy

On December 31, 2021, the EU Commission presented a concept that will classify natural gas and nuclear energy as sustainable investments in the EU taxonomy. This ensures that investors can now invest in environmentally friendly projects from the same basis (source:EU Commission).

The 27 EU member states initially had until January 12, after an extension until January 21, to react to the draft and to comment. While Germany says a clear no to nuclear power, opinions on gas are divided. The federal government describes it as a "bridging technology" that is the right way to reduce CO2 emissions and enable CO2 exit under certain conditions. Numerous climate protection organizations in Germany appealed to the coalition to classify both energy sources as environmentally harmful, as they send the wrong signals and endanger the energy transition (source:News).

As it is a delegated act, it will enter into force automatically without objection. This means that the EU Parliament or the Council of Ministers, the body of the member states, have to object within four to six months. Currently this is quite unrealistic. , as 20 of the 27 governments would have to vote against the draft. Eleven European countries, including France and Poland, support the EU Commission's draft. A failure in the EU Parliament is not to be expected (source:boten-energate).

Read more about this topic in the blog postNuclear power and natural gas in the EU taxonomy: what is it about?“.

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Legislative reform planned to protect electricity customers

The federal government is currently planning a legal reform of the Energy Industry Act to protect consumers from short-term cancellations of electricity and gas contracts by "cheap suppliers". As can be seen in Figure 2, the price of electricity in 2021 rose particularly towards the end of the year and is currently 40.46 ct/kWh. As a result of the rise in electricity prices, some low-cost providers have had to cancel thousands of contracts because they have aligned their contracts with speculation about low prices in the electricity market. . This means that terminated electricity and gas customers fall into the basic supply, which is significantly more expensive than a normal contract. The legal reform aims to protect consumers with clear notice periods and to better regulate the basic service (source:Handelsblatt).

In addition to a longer notice period, the Federal Ministry of Economics is planning a uniform tariff for basic services. New customers should pay more than existing customers. According to a study by the Federation of German Consumer Organizations (VZBV), new customers currently have to pay between 889 and 1,654 euros more per year (source:Handelsblatt).

Figure 2: Average electricity price for an annual consumption of 4,000 kWh in ct/kWh (source: Energy Brainpool based on Verivox Consumer Price Index, 2022 [2] )

Mixed movements in the gas market

After a downward trend late last year, gas prices rebounded earlier this month. However, due to an improvement in LNG supply, the price collapsed soon after. LNG production this week marks a new all-time high at just under 4,400 GWh/day (monthly 2,500 GWh/day). The very high LNG supply is relaxing the gas trading markets somewhat. However, impending supply disruptions due to the Ukrainian-Russian border conflict are driving the gas price, which is on an upward trend (source:Gordo).

While the previous month's electricity reacted to the fall in prices for other basic products in the middle of the month, the gas freeze gave the electricity price a corresponding boost towards the end of the month and the previous month's electricity was able to recover from the 200 euro mark. In the previous month, it had fallen below the mark for the first time since November (source:boten-energate).

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After the EUA lead contract price fell to €77.55/tCO2, the EUA price reached €90/tCO2 at the end of January and is currently heading for an all-time high. The record was set last month, on December 8th. , 2021 with 91.19 euros/t CO2 (source:Gordo).

Brent crude oil prices hit their highest level in three years. One of the reasons is that the Omicron variant is milder than previously feared. (Spring:Gordo).

Figure 3: Percentage price development of the reference year for German electricity (candles), CO2 certificates with delivery in December 2022 (orange line), reference year gas in the TTF (red line) and year coal benchmark (green line) from the end of December 2021 to the beginning February 2022 (Source: Montel, 2022 [3] )

Few hours of sun, but lots of wind

In January 2022, the share of renewables was 45 percent on average, higher than in the previous year (37 percent). Milder temperatures and windier weather are forecast for the remainder of the winter, which should ease pressure on gas prices (source:Gordo). There was little solar power throughout the month, with solar power hitting its lowest point in January at 0.84 TWh. Wind power fluctuated greatly over the course of the month. It ranged from 1.44 GW to 43.47 GW. In general, the wind power of 12.34 TWh was at a high level and roughly corresponds to the wind power of the last few months (source:Energy diagram).