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Germany: Record power trading surplus in January 2019
Surely a reason to celebrate, no? And yet for critics, electricity exports suggest climate-damaging excess. Can this be true?

Germany is the master of all things export – even when it comes to electricity. In January 2019, Germany clocked a record surplus of 7.2 terawatt hours (TWh) – 13 percent more than during the former record month of January 2016 – according to Bruno Burger, expert for energy system technology at the Fraunhofer Institute for Solar Energy Systems ISE.

Burger is responsible for calculating the energy flows between EU countries for “Energy Charts”, and, according to his records, most of the exported power went to Switzerland, in part via Austria. However, the Swiss went on to forward most of the imported power to Italy. Austria came in second which, in turn, transported considerable amounts of electricity to Hungary and Slovenia. Belgium and Great Britain, too, sourced a lot of power from Germany, via the Netherlands. “In January, Germany achieved an export surplus to all neighbouring countries except Sweden”, says Burger. When it came to the Scandinavians, the figures were predominantly balanced.

Export surplus slightly lower in 2018

This is not a new phenomenon. For some years now, Germany has been exporting between 11 to 15 percent of its generated power to neighbouring countries. Once tallied, this means Germany exports even more power than France with its fleet of nuclear power stations. The target countries also tend to be repeat customers. More than half the German power supplies regularly go to the same three countries, namely Switzerland, Austria and the Netherlands. Yet, only a small part of this electricity is actually used by these nations.

Italy and Belgium in particular, but also Great Britain and a number of Eastern European countries, profit from German power imports. Germany itself purchases electricity on an hourly basis from the pumped storage power plants of the Alpine countries in order to bridge acute shortages, and electricity from German wind farms flows to southern Germany, sometimes via Poland and the Czech Republic.

Despite these ‘re-imports’, the German electricity trade balance is clearly positive. For seven consecutive years, the export surplus – i.e. the difference between exports and imports – has risen on average by almost 44 percent every year from just under 6 terawatt hours (TWh) in 2011 to almost 53 TWh in 2017. It was not until 2018 that the export balance fell for the first time – by a solid 7 percent to 49 TWh.

German power is simply more cost-effective

What does the future look like for German power exports? “That’s hard to say”, declares Fraunhofer scientist Burger. He lists a number of factors which he considers significant: the economic situation in Europe, the availability of power stations abroad and the end of coal-fired power generation in Germany. Despite the fact that the capacity of coal-fired power plants has been declining significantly for years as the stations gradually transition into security stand-by or are side-lined by the market, the percentage output – at least of lignite – has only declined moderately. This is a contributing factor in German wholesale prices being amongst the lowest in the EU. Critics reason that the German export surplus is therefore harmful to the climate.

A spokesman for the German Association of Energy and Water Industries BDEW told en:former: “It is ultimately not possible to prove which power is flowing across the border.” However, it is correct that the volume of exports largely depends on the wholesale price: “The wholesale price is determined by supply and demand. And on the supply side, marginal costs are the deciding factor.”

Coal-fired power decreases prices in times of shortage

Marginal costs are the costs incurred for each additional kilowatt hour produced. They therefore depend to a large extent on the prices of primary energy sources. In conventional power plants this means raw materials such as gas and coal. When it comes to wind and solar power this means – you guessed it: wind and sun. “Wind and solar parks have the lowest marginal costs,” says the BDEW spokesman. “This means that coal-based electricity, which is inexpensive compared to electricity from gas-fired power plants for example, is more popular when wind and solar farms are not producing any electricity.”

Clocking in at 15.1 TWh of wind power, January 2019 was the second-strongest wind power month ever. Lignite helped generate 9.9 TWh of electricity, which is actually not much for January. However, it is also true that wind power is virtually always produced as soon as possible. Coal-fired electricity, on the other hand, is generated when there is demand from consumers.

Europe’s power market must come together

There are always more export consumers when the electricity trading prices in Germany are lower than abroad. It is thus not surprising that the record balance, once again, is posted in January. In southern countries, in particular, many households opt to bridge the few cold days of the year with – relatively expensive – electric heating systems. It is therefore understandable that they then prefer to import affordable power from Germany, instead of cranking up their own gas-fired power stations.

Burger argues that it would have been better for the climate if the latter had been the case, because gas emits less carbon dioxide than lignite when it is converted into electricity. However, Burger also knows that the unused emission certificates could have been traded and used for other purposes. “Plainly speaking, there are just too many certificates in circulation”, he says.

However, the EU has already decided to reduce the number emission certificates. As a result, their value rose from around five euros in mid-2017 to more than 20 euros in mid-2018.

“This is necessary to hit the climate targets,” agrees the BDEW spokesman. However, the spokesman views a further scaling back of emission certificates critically. This would make further conventional power plants unprofitable, meaning they could be decommissioned even sooner than the recently presented results of the Coal Commission recommend.

This could present a challenge for power supply in Germany and its neighbouring countries, in particular as several European countries are currently reducing their guaranteed capacities.

Both experts agree that international trade must play a major role in providing electricity 24/7, nationwide and at the lowest prices. The general consensus is that security of supply should not be considered a national undertaking. Which country achieves the surpluses is secondary. However the BDEW spokesman caveats: “Trade alone cannot create security of supply. When it comes down to it, particularly an industrial location such as Germany must be able to cover its own demand with sufficient domestic energy.”

Photo credits: David MG, shutterstock.com

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