“The price of electricity needs a cap – now.” This is the demand of the German Steel and Metal Processing Association (WSM).
The merit-order pricing model is imposing record costs on electricity consumers. And to many “gas-free” power plant operators, rich profits, since the electricity produced with gas usually sets the price. “The state must stop these windfall profits by capping the price of gas used to generate electricity. The EU Commission has given it the opportunity – it must now use it. And it must do so before the industry has to extend its electricity contracts,” demands the steel and metal processing industry association in its current position paper.
EU Commission has come out in favor of limiting price
Thanks to the merit-order pricing model, even power plants that produce much less expensively often collect the expensive tariff for electricity from natural gas. This is because as soon as a natural gas power plant is used as a demand cover, its price applies to everyone. And this often happens: “Despite increased coal-fired power generation, gas-fired power plants remain systemically relevant and will continue to generate extreme energy costs,” says WSM CEO Christian Vietmeyer.
Only the state can change this by decoupling the gas price. The EU Commission has come out in favor of capping the price of electricity produced with natural gas. “What is the federal government waiting for? Our medium-sized members cannot understand why they should take out KfW loans to finance the windfall profits of the power industry,” the WSM underlines in its position paper.
Time is of the essence: Industrial companies must extend electricity contracts
Time is pressing; many medium-sized industrial companies are about to renew their electricity contracts. The Ukraine war has fueled price increases, and the curbed filling of North Sea Pipeline 1 is fueling them further. The electricity price is already a good 20 percent higher than in 2021, despite the elimination of the EEG subsidy. In 2023, the figure will be 100 percent.
Pricing system for electricity outdated
In this dramatic situation, electricity consumers lack any understanding of the fact that power plants are lining their pockets thanks to an outdated pricing system. In 2021, the average marginal cost of the most expensive gas-fired power plant was 226 euros per megawatt hour. For other power plants, however, it was only 17 to 145 euros. The difference is profits. “This has to stop – that’s why we need the government brake,” Christian Vietmeyer emphasizes.