FAU economist disillusions economy and society<\/p>\n\n\n\n
Companies and consumers have high hopes that electricity prices will return to levels seen before the coronavirus pandemic. After Russia\u2019s invasion of Ukraine and the departure from using Russian gas, energy costs rose to record levels. However, from a scientific point of view, there will be no return to previous normal levels. Quite the contrary, in fact. The price of wholesale electricity at the beginning of 2025 is on average between 94 and 114 euros per megawatt hour (MWh). That is more than six times the price before the energy crisis. However, the prices per MWh on the energy market can fluctuate between around \u2013100 euros and around 1000 euros at short notice. \u201cThe purpose of our study is not to generate detailed predictions about prices,\u201d emphasizes Prof. Dr. Mario Liebensteiner, Professorship for Energy Markets and Energy Systems Analysis at Friedrich-Alexander-Universit\u00e4t Erlangen-N\u00fcrnberg (FAU). \u201cInstead, it predicts a very high and, above all, volatile price level for wholesale electricity in the years to come.\u201d The study called \u201cHigh electricity price despite expansion in renewables: How market trends shape Germany\u2019s power market in the coming years<\/a>\u201d has recently been published in the journal \u201cEnergy Policy\u201d.*<\/p>\n\n\n\n The study by Prof. Liebensteiner, Anas Abuzayed, who is a doctoral candidate at FAU, and Dr. Fabian Ocker from TenneT TSO GmbH, considers the most important market trends for the development of the price of electricity in Germany until 2030. It therefore provides politicians with guidance based on facts for shaping future energy policy. This is because Germany as a location for business and industry is at greater risk compared with other countries according to the prognosis. At the same time, the paper provides valuable information to industry and business as to which investments relevant to energy costs are probably worthwhile. It also informs consumers whether solar panels on the roof, a heat pump or an electric car could be worthwhile.<\/p>\n\n\n\n \u201cThe prediction for the electricity price corresponds to what\u2019s know as the baseline variant of the scenario prognosis. It takes the most important influencing factors and assumes continuous development without any upheaval such as economic crises or any more wars,\u201d explains Mario Liebensteiner. \u201cFurther planned expansion of renewable energies will ensure a downward trend in the price of electricity.\u201d At the same time, growing demand for electricity increases the price. The increase in demand is driven, for example, by e-mobility, heat pumps, heating and cooling in buildings, computing centers and, potentially in the future, electrolyzers for hydrogen production. Energy costs are also set to rise due to the continuous increase in the price of CO2, which has a negative impact on fossil fuels such as coal in particular. The price of gas, which is currently considerably higher due to the geopolitical situation with Russia, is leading to higher electricity prices. The study, however, anticipates a moderate price increase. Another influencing factor is the export and import of electricity within Europe. Germany\u2019s special route with its phaseout of nuclear power tends to make energy consumption more expensive.<\/p>\n\n\n\n Predictions about the influence of identified key determinants on future developments can be made on the basis of a validated model. A basic scenario is generated based on obvious and foreseeable developments. Influencing factors such as the price of gas or CO2, demand or the return to nuclear energy can be varied in different ways. This leads to different effects within the model that generate corresponding scenario prognoses. In this case, the focus lies on the development of the electricity price in Germany in the future. The developments in the other countries of the European electricity market or unforeseen geopolitical developments have not been included in the model.<\/p>\n\n\n\n The basic scenario predicts an exchange price for electricity until 2030 that could be almost three times as high as the price before the energy crisis. If the growth in renewable energies is higher during the next five years while other factors remain the same, the electricity price during the next five years could continue to decrease. The study identifies Germany\u2019s departure from nuclear power as a factor for driving the price upwards. Available nuclear energy would have a significant effect on the electricity price level. However, Liebensteiner points out that factors known as externalities have not been taken into consideration in the study. These include the general risk associated with nuclear power or the costs for the interim storage and disposal of waste.<\/p>\n\n\n\n The scenario analysis also shows the significant pressure caused by higher post-consumer electricity consumption, for example due to the electrification of industrial processes. Higher gas prices or a higher increase in the price of CO2 also drive exchange prices upward.<\/p>\n\n\n\n The increasing proportion of renewable energies in the electricity generation mix will ensure greater upward and downward fluctuations in price on the exchange in the future. This volatility can occur during one day, from day to day, or according to the season of the year. For example, in mid December, dark doldrums occurred where there was not enough sun or wind, leading to a short-term price increase to around 1,000 euros per MWh. \u201cOn a sunny afternoon, the electricity price can sometimes slip into negative figures. This means consumers receive money when they consume more in periods where over-production of wind and solar energy occurs,\u201d explains Mario Liebensteiner.<\/p>\n\n\n\n An econometric model forms the basis for the study with its scenario predictions. It uses historical electricity market data for Germany from 2015 to 2023. This makes the influence of defined market trends understandable in retrospect (ex post). It clearly illustrates the interplay between wind and solar electricity, demand for electricity, nuclear power, CO2 certificates, gas prices and power trading on the wholesale electricity price on the exchange. In contrast to most studies conducted to date, Liebensteiner investigated a comprehensive series of long-term drivers of the electricity price.<\/p>\n\n\n\n The results of the study facilitate a well-informed political debate about market design as well as about how to provide assistance to lower-income households. In industry, expectations about the price of electricity in the future influence specific investment decisions.<\/p>\n\n\n\n The econometric model is a mathematical statistical tool used in economics. It illustrates economic correlations and the influence of various factors on each other, the relationships between which can be tested using empirical methods. In this case, it includes renewable energies, nuclear energy or also increases in CO2 prices and their effect on the price of electricity. An ex-post model always uses known data from the past in order to provide an explanation for economic events. This means an econometric model is more complex but also more accurate than other models.<\/p>\n\n\nStudy predicts prices until 2030<\/h3>\n\n\n\n
Systematic calculations of market trends<\/h3>\n\n\n\n
Aside: Scenario prognosis<\/h3>\n\n\n\n
Various scenarios<\/h3>\n\n\n\n
Price surges for electricity are the new norm<\/h3>\n\n\n\n
Econometric model for informed political debate<\/h3>\n\n\n\n
Aside: The ex-post econometric model<\/h4>\n\n\n\n
Source<\/h5>\r\n\n\n\n