Electricity price at its highest level in six years

The price of electricity could soon rise significantly. Because the EU Commission has decided to significantly reduce the number of CO2 certificates. This increases their price.

Each revolution could soon become more expensive.  The Internet portal Check24 reported on Tuesday.

AConsumers could face further increases in electricity prices. The Internet portal Check24 recently reported this. Wholesale electricity is more expensive than it has been for six years. So far, network charges, taxes and charges in particular have driven the price up for end customers. But now the purchase prices for energy suppliers are at a record level.

The main reason for this is the increased costs for CO2 certificates. “Consumers have been paying record prices for electricity for a long time,” said Oliver Bohr, Managing Director Energy at Check24. “You have to be prepared for further price increases in the long term, since electricity itself has increased in price. When this development reaches the end customer depends on the purchasing policy of the individual suppliers. ”At the moment, consumers in Germany paid an average of 1399 euros for the average annual consumption of 5000 kilowatt hours of electricity in a four-person household.

In fact, the wholesale price for electricity – more precisely the so-called benchmark Cal19, i.e. the electricity term price for the 2019 calendar year – has reached a record level, confirmed energy expert Steffen Bukold from the Hamburg consultancy Energie Comment. The contract has been running for a few years and has hit an all-time contract high. The background to this is the high forward prices for coal and gas and especially for CO2 certificates, the price of which has quadrupled from 5 to 20 euros per ton within a few months.

EU wants to reduce the number of emission certificates

In terms of short-term electricity prices, there are also repeated unplanned failures in nuclear power plants and lulls in wind energy, which have pushed the electricity price up. In the particularly hot weeks of summer, some power plants had to be throttled because limit values ​​were exceeded in the rivers from which they draw cooling water.

But why have the certificates in the European emissions trading system (“EU Emissions Trading System”, ETS for short) suddenly become so much more expensive? The increase was particularly noticeable this year, and a little last year as well. The certificate price rose from around 5 euros per tonne of CO2 a year ago to a good 15 euros in July and recently more than 20 euros (see graphic).

Image: FAZ

At least one reason seems to be the reform of the system, in which the number of certificates is to be significantly reduced. “The EU Commission has decided to significantly reduce the number of surplus certificates from the coming trading period,” reports Check24. “Because some certificates can be transferred, this already affects the price.”

Energy expert Bukold names three reasons which, in his opinion, contribute to the higher prices for the certificates: Firstly, the aforementioned reform of the system, but also a – possibly related – speculative factor and high demand. The sustainability of the price increase could depend on the question of how strongly the price increase is driven by speculation.

Image: FAZ

Scarcity is supposed to solve difficulties

The background for the reform of the European emissions trading was the finding that the existing system was not working properly. Actually, trading in emission rights should lead to a decrease in the amount of emissions by reducing the number of these certificates over the years and the market ensuring that the savings are made where this is particularly efficient.

In addition to the difficulties that this system only includes a small part of all countries and that certain economic sectors such as transport are excluded, many politicians at least had the impression that there are basically too many surplus certificates on the market. Accordingly, the price was low for a long time and ranged between around five and seven euros. In part, the excess of certificates was justified by the fact that too many had been assessed right at the beginning – but in part also with developments since then.

A shortage should now solve the difficulties. The move was highly controversial. A compromise between the European Council, the EU Parliament and the EU Commission now provides for some of the pollution rights to be shut down. For this purpose, from 2019 onwards, 24 percent annually (from 2024 to 12 percent) of the unused certificates from the market are to be transferred to a reserve, several billion such rights are at stake.

In addition, the annual shortage (“cap”) of certificates is expected to increase from 2021, from currently 1.7 to 2.2 percent. In doing so, the European Union wants to come closer to its goal of reducing emissions of so-called greenhouse gases by 40 percent below the 1990 level by 2030.