Wholesale prices have recently been falling for both gas and electricity. For end consumers, on the other hand, costs continue to rise. Experts give consumers little hope of a trend reversal.
The contrast could hardly be greater: the price of electricity on the exchange fell by more than 95 percent within just a few weeks. At the end of the year, the price even fell back into negative territory for the first time in a long time. This means that buyers and power supply companies sometimes got extra money if they accepted electricity. On Monday, the current price on the electricity exchange for Germany was just under 1.5 cents per kilowatt hour. In mid-December it was still over 40 cents. A clear, albeit not quite as blatant downward trend can also be observed for gas. The price for deliveries in the coming month on the Dutch energy exchange, which serves as a reference for the European market, fell to around 75 euros per megawatt hour, the lowest it has been since the beginning of the Russian invasion of Ukraine.
However, a completely different picture emerges when it comes to the prices for end consumers: Many suppliers significantly increased the prices for both gas and electricity at the turn of the year. Most electricity tariffs are now well over 40 cents per kilowatt hour, some even over 60 cents. Despite the falling prices at the wholesale level, experts give end consumers little hope of any noticeable relief in the near future.
“Most utilities procure the electricity for the long term, in tranches over one, two or three years,” explains Tobias Federico, Managing Director of the consulting firm Energy Brainpool. Depending on the procurement strategy, the purchasing costs would therefore result from medium or long-term average prices. “Short-term slumps are just as little reflected in this as the extreme price peaks that occurred on the energy markets in the summer.” The long-term procurement strategies would have protected consumers from the price jumps on the stock exchange last year. The other side of the coin, however, is that even short-term falling prices are not passed on directly.
Energy market expert Mirko Schlossarczyk, partner at the energy consulting firm Enervis, is not surprised that many suppliers are increasing their prices at the turn of the year, despite the easing on the energy exchanges. “According to our calculations, prices above the 40-cent threshold should now roughly correspond to the suppliers’ procurement costs.” According to Schlossarczyk, it cannot be ruled out that there are individual black sheep in the industry who are trying to increase their margins at the expense of consumers as part of the general wave of price increases and at state expense as part of the electricity price brake. However, most of the recent price increases should be justified. The cartel office has already announced that it will examine the price increases in order to prevent electricity or gas providers from using the price brakes to cash in.
Schlossarczyk also points out that the procurement costs only make up part of the electricity price that the utility companies pass on to the end consumer. Among the other costs, taxes and surcharges, which make up about half of the end consumer price, the network operator fees have recently increased significantly.
Whether wholesale prices will continue to fall in the long term, so that consumers could also feel some relief in the medium term, depends largely on the weather. The weather, in this case a lot of wind during the holiday season at the end of the year with little demand for energy, also led to the short-term oversupply of electricity and the recent drop in prices on the stock exchange. “A longer period of dark doldrums can quickly move prices back in the other direction at any time,” says Schlossarczyk.
The fall in wholesale gas prices is also largely due to the weather. Less heating requirements due to the high temperatures and less need for gas-fired power plants to generate electricity recently allowed more gas to be stored again. That natural gas could become scarce in Germany has become unlikely, at least for this winter. However, this is by no means guaranteed for the next heating season.
In any case, the gas price is likely to remain significantly higher in the long term than it was before the war in Ukraine. “Liquid gas, which is supposed to replace Russian gas delivered by pipeline in the coming years, is simply much more expensive,” says Schlossarczyk. In addition, Germany, as a buyer, competes with other countries on the world market for the gas that can be transported by sea. If, for example, the economy in China picks up again after the current corona wave, the demand for natural gas there and thus the price of liquid gas should also skyrocket again.
