Technical error on the electricity exchange: electricity price skyrockets

Contents

The electricity markets in Europe complement each other and electricity is also sold across national borders every day. This leads to lower electricity prices overall and balances out varying demand and production through renewable energy. This is why the so-called day-ahead auction on the EPEX SPOT power exchange in Paris is called "Single Day-ahead Coupling" (SDAC), i.e. it is conducted across national borders. Actually - because the international matching did not work during the price determination for June 26 and the price for Germany skyrocketed between 5 and 8 am. Between 6 and 7 a.m. it was 2.33 euros per kilowatt hour, whereas prices of around 10 cents would have been realistic.

Market-clearing prices

In day-ahead trading, electricity producers offer their generation capacity for the following day by noon and buyers place their desired quantities. On this basis, a price is formed for each hour of the day according to the principle of market-clearing prices (merit order effect): The offers are sorted by price in ascending order and all receive the lowest price at which demand is just covered. The most expensive suppliers are those who have to burn fuel for generation, the cheapest are renewable energy sources. They enter the auction with low prices because their systems are already set up, and it is not relevant whether a PV system is running or not, for example.

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Recently, little cheap electricity has been offered in Germany at night and demand has been met by cheap electricity from France, among others. Nuclear power operators there offer cheap electricity because they cannot shut down their power plants when demand is low in their own country.

Separate auctions

The exchange has not yet published what exactly went wrong at EPEX. Apparently, bids and demand could not be synchronized across Europe, meaning that the auctions were held for each country. Due to the merit order principle, everyone then pays the price of the most expensive German gas-fired power plant that still has to be started up to cover demand. Anyone who was able to offer electricity from wind or hydropower during these periods or operate a large battery storage facility for arbitrage trading made a good deal during this time.

An expert from a transmission system operator, who does not wish to be named, told the energy market portal Montel. He stated that there had never been such a far-reaching case of decoupling the auctions. An official statement from EPEX is not yet available on its website. A spokeswoman merely told Montel that the case was still being analyzed and that no details could yet be given.

Annoying for dynamic tariffs

The error has a concrete impact on customers with dynamic electricity tariffs, such as those offered by Tibber and Awattar. These providers pass on the day-ahead prices directly to customers, plus grid charges. Anyone who has charged their electric car without looking at the prices anticipating low prices must expect significantly higher costs. Customers on such tariffs should not switch on any large consumers from 7 p.m. on Wednesday if possible. Prices will then soar to up to 1.80 euros per kilowatt hour. Awattar warned its customers by e-mail at midday to consume a lot of electricity in the evening.

The error has hardly any impact on customers with fixed prices. The electricity suppliers only buy part of the energy via the day-ahead market, large parts are purchased on a long-term basis. The one-off error is unlikely to have any impact on electricity prices.

(jam)