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Russia curbed its natural gas supply to Europe in 2021 and 2022, creating a grave energy crisis. This paper empirically estimates the crisis response of natural gas consumers in Germany—for decades the largest export market for Russian gas. Using a multiple regression model, we estimate the response of small consumers, industry, and power stations separately, controlling for the non-linear temperature-heating relationship, seasonality, and trends. We find significant and substantial gas savings for all consumer groups, but with differences in timing and size. For instance, industry started reducing consumption as early as September 2021, while small consumers saved substantially only since March 2022. Across all sectors, gas consumption during the second half of 2022 was 23% below the temperature-adjusted baseline. We discuss the drivers behind these savings and draw conclusions on their role in coping with the crisis.
Contracts for differences are widely seen as a cornerstone of Europe's future electricity market design. This paper is about designing such contracts. We identify the dispatch and investment distortions that conventional CfDs cause, the patches used to overcome these shortcomings, and the problems these fixes introduce. We then propose an alternative contract we call “financial” CfD. This hybrid between conventional CfDs and forward contracts mitigates revenue risk to a substantial degree while providing undistorted incentives. Like conventional CfDs, it is long-term and tailored to technology-specific (wind, solar, nuclear) generation patterns but, like forwards, decouples payments from actual generation. The proposed contract mitigates volume risk and avoids margin calls by accepting physical assets as collateral.
Eine Teilung des deutschen Marktgebietes würde die Marktwerte erneuerbarer Energien beeinflussen. Wind und Photovoltaik (PV) im Süden Deutschlands würden an Wert gewinnen, während Erneuerbare im Norden Erlöse einbüßen würden. Bei einer auch zukünftig stärkeren Konzentration von erneuerbaren Energien im Norden bedeutet dies insgesamt einen höheren Förderbedarf für PV – Wind wäre trotz niedriger Marktwerte in den meisten Regionen wirtschaftlich. Wenn eine regionale Steuerung erreicht werden soll, müsste die auszuzahlende Förderung für neue PV-Anlagen anhand des zonenübergreifenden Referenzmarktwertes berechnet werden. Durchschnittliche Börsenstrompreise würden durch eine Gebotszonenteilung im Süden Deutschlands leicht angehoben und im Norden gesenkt, die Effekte auf Endkundenpreise und damit verbundene Anreize zur Standortwahl von Industrieunternehmen sind allerdings als gering einzuschätzen.
The average revenue, or market value, of wind and solar energy tends to fall with increasing market shares, as is now evident across European electricity markets. At the same time, these markets have become more interconnected. In this paper, we empirically study the multiple cross-border effects on the value of renewable energy: on one hand, interconnection is a flexibility resource that allows to export energy when it is locally abundant, benefitting renewables. On the other hand, wind and solar radiation are correlated across space, so neighboring supply adds to the local one to depress domestic prices. We estimate both effects, using spatial panel regression on electricity market data from 2015 to 2023 from 30 European bidding zones. We find that domestic wind and solar value is not only depressed by domestic, but also by neighboring renewables expansion. The better interconnected a market is, the smaller the effect of domestic but the larger the effect of neighboring renewables. While wind value is stabilized by interconnection, solar value is not. If wind market share increases both at home and in neighboring markets by one percentage point, the value factor of wind energy is reduced by just above 1 percentage points. For solar, this number is almost 4 percentage points.
Electricity needs to be consumed at the very moment of production, leading wholesale prices to fluctuate widely at (sub-)hourly time scales. This article investigates the response of aggregate electricity demand to such price variations. Using wind energy as an instrument, we estimate a significant and robust short-term price elasticity of about −0.05 in Germany and attribute this to industrial consumers. As the share of consumption that is exposed to real-time prices (currently less than 25%) expands, we expect the aggregated price elasticity to grow.