Consumers will benefit from Habeck’s gas power plant decision

Federal Minister for Economics and Climate Protection

The activation of the coal-fired power plants should be particularly bitter for the Green Minister.

(Photo: dpa)

Federal Economics Minister Robert Habeck (Greens) set an example on Sunday. He said loud and clear that gas-fired power plants should be taken off the grid as quickly as possible so that more natural gas is available to fill the gas storage tanks. As a replacement, old coal and oil-fired power plants are being put back into operation.

From a climate policy point of view, this is unfortunate. It is true that CO2 emissions in the energy sector are limited by the European emissions trading system; there is therefore no danger that the CO2 emissions of the energy sector will shoot up to unimagined heights. But the symbolic content of the decision is devastating: Ironically, a Minister of Economics from the Greens has to face the realization that the old CO2 slingshots are indispensable in times like these. The argument of the lignite power plant operators that lignite is the only national energy reserve that is available cheaply and in large quantities has thus gained new importance.

The primary aim is to ensure that Germany goes into next winter with the highest possible level of gas storage. The federal government is even willing to make additional billions available in order to come close to this goal with additional gas purchases in the coming months.

But there is one effect of the measure that usually goes unmentioned in the public debate. Gas-fired power plants usually set prices on the electricity market.

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This means that the last megawatt hour that is requested on the electricity exchange for a specific hour usually comes from a gas-fired power plant – and is the most expensive. The price that is paid for the electricity from the gas power plant also applies to all other types of generation – much to the delight of the operators of coal-fired power plants, nuclear power plants, oil power plants, wind turbines and photovoltaic systems.

This so-called merit order effect flushes large sums of money into the coffers of all electricity producers. In the past few weeks and months, many power generators have made enormous profits. The debate about whether an “excess profit tax” should be introduced has long been in full swing.

Consumers save money

If the current gas shortage situation continues to worsen, this will drive up the prices for natural gas itself and thus for the electricity produced with gas even further – at the expense of electricity consumers, who are already suffering from the high electricity prices. However, the less frequently gas-fired power plants determine the price of electricity, the better it should be for consumers.

Habeck’s measure should therefore have a price-dampening effect. In these times, that’s not the worst news.

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