Power Price Concerns Grow

Power Price Concerns Grow

Concerns are emerging within the energy sector regarding the potential for market distortions arising from the proposed industrial electricity price being considered in Germany.

Kerstin Andreae, Managing Director of the German Association of Energy and Water Industries (BDEW), cautioned in an interview with the “Rheinische Post” that while energy-intensive industries require further relief measures, implementation of schemes like an industrial electricity price demands careful consideration. She emphasized the importance of persistent support for network fees and stressed that any new industrial electricity price initiatives “must” involve thorough discussion with the industry to avoid unintended consequences – including potential disruption to the derivatives market.

The recent approval of the EU’s Temporary Crisis and Restructuring Framework for Flexibility (CISAF) formally clears the path for Germany to introduce such a price, subject to adherence to specific conditions. Andreae underscored the necessity of preventing substantial government intervention in the market, warning of potentially negative repercussions.

A key worry is that widespread utilization of the proposed measures by companies could lead to significant price risk mitigation by the state. This, she argued, could reduce incentives for businesses to secure long-term market safeguards through futures contracts, negatively impacting liquidity and potentially driving up prices for market participants not directly benefiting from the industrial electricity price.

Furthermore, there are fears that the attractiveness of long-term power purchase agreements (PPAs) sourced from renewable energy projects (Green PPA) could be diminished. Andreae urged that the development of any national solution for an industrial electricity price in Germany must incorporate input from both the industrial sector and the energy industry.

The potential for an industrial electricity price for energy-intensive companies was recently signaled by Federal Minister for Economic Affairs, Katheine Reiche (CDU), following the EU Commission’s revisions to the temporary crisis framework.