Overdue market design debate.
(Photo: IMAGO/Joerg Boethling)
The energy supply crisis reveals all the weaknesses of the electricity market design. The high gas prices are driving the entire electricity price level to absurd heights, although currently only around ten percent of the electricity consumed in Germany is produced in gas-fired power plants.
The operators of coal-fired power plants, nuclear reactors, wind turbines and photovoltaic systems who sell their electricity on the stock exchange rake in lavish profits.
In fact, the electricity market is currently working exactly as it should: the gas-fired power plants set the price for the remaining types of generation. One of the desired effects: There is an incentive to invest in renewable energies.
The high price of electricity threatens the existence of entire industries
However, it is currently becoming apparent that the electricity market design is unsustainable in the gas market crisis: due to the high gas prices, the electricity price has reached a level at which it threatens to destroy entire sectors and is a hitherto unknown burden on private households. Politicians cannot stand idly by. She will have to intervene.
Top jobs of the day
Find the best jobs now and
be notified by email.
Of course it would be nicer if you left the pricing to the market. But the foreseeable collateral damage is unacceptable. It is also true that the electricity market is already extremely influenced by government actions.
For years, the state has not left the electricity market to its own devices. The politically enforced expansion of renewables and the decisions to phase out nuclear power and coal are just the most visible signs of this.
Now politicians will have to intervene again. Various proposals are on the table. All have serious disadvantages. But the current situation is no longer acceptable.
And the current market design is not a value in itself to be defended tooth and nail.
More: Industry warns of massive damage from short-term gas shutdowns