Title: Current Wholesale Electricity Prices Dip Below 2021 Levels
In 2021, six nuclear power plants continued to operate in Germany, despite higher electricity prices compared to the current scenario. As reported by the International Forum for Renewable Energy Economics (IWR), the average wholesale electricity price in 2024 dropped to 7.95 cents per kilowatt hour (kWh), marking a notable decrease of 16.8% compared to the previous year. IWR also noted a decrease in prices in 2023, averaging 9.55 cents per kWh.
Interestingly, despite the total phase-out of nuclear power, the 2024 electricity price was still lower than the 2021 level of 9.66 cents per kWh. To arrive at these findings, IWR analyzed data from the EPEX Spot electricity exchange.
The subsequent price hike between mid-2021 and the end of 2022 resulted from a combination of unique factors. These included soaring gas prices due to Russia's invasion of Ukraine, prolonged maintenance delays, and gas storage issues at French nuclear power plants, as well as corrosion discovered at the close of 2021.
In 2021, German wholesale electricity prices surged from 5.3 cents per kWh in May to 14.0 cents in October. According to IWR, insufficient gas storage facilities supplied by Russia began in the summer of 2021, leading to price increases.
The exorbitant gas prices directly impacted wholesale electricity prices, as the pricing system on electricity exchanges is based on a marginal cost model. This model designates the most costly energy source as the determining factor for the entire wholesale electricity price, even for cheaper sources that might also be utilized.
This escalation in electricity prices is a multifaceted issue that goes beyond just the post-pandemic economic recovery. Other factors contributing to the rise in prices include the upward trend in natural gas and coal costs, a decrease in renewable energy generation, and energy insecurity and limited storage supplies. These elements combined to create record-high electricity prices, with prices reaching over six times the pre-crisis levels by the start of 2025, averaging between 94 and 114 euros per megawatt hour (MWh).
In response to this situation, wholesale electricity prices in the European Union, which includes Germany, began to decrease starting in 2023. This drop can be attributed to several factors, such as decreased demand, improved renewable energy integration, and market adjustments. However, these prices remain above pre-pandemic levels and are anticipated to stay elevated and volatile until 2030 due to ongoing trends and factors, including industry electrification and higher CO2 prices.
Despite the higher electricity prices in 2021, the average wholesale price in 2024 was still lower than that year's level at 9.66 cents per kilowatt hour. The price hike in 2021 was primarily due to soaring gas prices and insufficient gas storage facilities, leading to an increase in the wholesale electricity price.
