Handelsblatt author Thomas Hanke analyzes interesting data and trends from all over the world in the column.
(Photo: Klawe Rzeczy)
The state has placed a package under the Christmas tree for German citizens: the certainty that the electricity price cap will apply to a maximum of 40 cents per kilowatt hour from January 2023. Up to 200 billion euros, which corresponds to almost half of the federal budget, are to flow into the “brakes” for gas and electricity prices.
However, those who are happy lose their joy when they compare their situation with that of other EU citizens, such as the French or the Spaniards. Because they sometimes pay significantly less.
In France, consumers pay 17 cents for a kilowatt hour of electricity, i.e. less than half of the German tariff that will be subsidized from January 2023. In Spain, the regulated tariff is even lower, at 12 cents. The “free” price is higher and also varies greatly over the course of the day, between eight and 30 cents. On average, the customer of one of the major Spanish suppliers pays about 17 cents per kilowatt hour. How can that be?
In order to achieve a much better result for the consumer, the state there does not dig as deep into its pockets as it does in Germany. West of the Rhine, the executive has simply ordered the quasi-monopolist EDF to cap its electricity tariffs and even give its competitors a larger quota of cheap electricity.
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It was foreseeable that this would drive the supplier to the brink of ruin. But because France already controlled the majority of the shares, the government decided to simply nationalize the company again. A capital injection of three billion euros initially secured the operation, the nationalization is likely to cost another seven billion.
“This is a strong strategic decision that is necessary for the country,” said Economics and Finance Minister Bruno Le Maire in the summer. Above all, it is an expensive decision, but the costs pale in comparison to what the rescue of Uniper alone costs in Germany: around 35 billion euros.
Spain has negotiated an exception
In Spain, the executive acts differently. After tough arguments in Brussels, she was able to push through the “Iberian exception”. In general, the principle of the “merit order” applies in the EU when setting electricity prices. Power plants are switched on in the order of their generation costs in order to cover the respective demand. First the renewables as the cheapest, then coal, finally gas, currently the most expensive energy source. However, all of them receive the price per kilowatt hour from the marginal – most expensive – provider, i.e. the gas-fired power plants.
Against bitter resistance from Germany, Spain has managed to deviate somewhat from this. The Iberians pay the suppliers who use gas-fired power plants a subsidy for the fossil raw material. That lowers everyone’s prices.
>> Read also: The Iberian gas price cap reduces inflation – but also has negative consequences
On average, Spain covers around half of its electricity requirements from renewable sources. If the weather conditions are right, it is even two thirds, mainly wind, but also sun. The price advantage is enormous: Spain demanded 52 euros for a megawatt hour in European wholesale on Thursday, in France and Germany it was 239 euros at the same time.
The lower prices benefit private households, but also their own industry. Germany could also benefit if the full costs of gas-fired power plants were no longer the yardstick. Because in the first three quarters of 2022, around 45 percent of the electricity came from renewable sources.
The federal government sees it differently: prices based on marginal costs have proven themselves as a market economy principle, and this should continue to be the regulatory rule, otherwise the EU would sink into the arbitrariness of the state economy. But how does the state price brake fit in with this, like the German siphoning off of the so-called “accidental profits” from producers who make a fortune with extra profits, like the nationalization of companies like Uniper? Only Santa Claus can explain that.
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