From mid-2021 onwards, the exchange rate of electricity will continue to soar and is currently at an all-time high. More than 250,000 elderly households in our country are at risk of energy shortages. But the situation is not just limited to individual families, it threatens society as a whole. Production costs are extremely high and competitiveness is reduced. sparking an inflationary spiral. Society will become poorer, except for those profiting from high energy prices (especially high-margin sellers). What is behind it?
There are various reasons for rising energy prices. Extreme prices, especially for natural gas, climbed to €316 per MWh at the end of August, reaching five times his European market price in January. In addition to gas prices, there is uncertainty about the supply of energy feedstock from Russia as the Putin administration seeks to respond to Western sanctions. Another factor is the closure of half of France’s nuclear power plants due to lack of cooling water in rivers or problems with high temperatures and corrosion. From a traditional electricity exporter, France has become an importer.
Delete merit order?
Unlike fossil or nuclear energy, solar, wind, hydroelectric and geothermal energy have no raw material costs for operating energy. Renewable energy marketing should therefore be under the direction of green energy companies. Above all, there have long been a number of certified companies abroad that sell green power directly to customers.
Renewable energy sources are often responsible for rising energy prices. However, renewable energy sources provide the cheapest electricity today.
One way to permanently lower the price of electricity is to remove green power from the energy exchange. The exchange mechanism determines the current price according to the so-called merit order mechanism. Prices stabilize when supply and demand match. Power plants that can produce electricity cheaply are used first to meet demand. They are solar and wind power plants, replacing expensive coal, gas and oil plants and bottoming out in production prices. As demand increases, more expensive power plants are added until the expected demand is met. The final price depends on the last and therefore most expensive power plant. It is now a gas power plant. There are several reasons for their high price. On the one hand, it operates only for short hours during the day, which slows the amortization of the total investment cost, and on the other hand, it is burdened by the high price of natural gas. Border costs play an important role here. For electricity, the additional megawatt-hours are decisive. For example, if 99% of the power required to meet demand is 5 cents per KWh and the last 1% is 50 cents per KWh, all power will cost 50 cents per KWh according to merit order. This is one of the basic rules of supply and demand. In the Czech Republic, less than 10% of electricity is currently produced from natural gas. If the merit order principle were abandoned, price increases would be less important.
But according to Klaus Gugler, an economist at the Vienna University of Economics and Business, abolishing the merit order system would be costly. Over the last 20 years, the energy industry has successfully used this system. If there is a change now, it could mean state intervention. The best solution is a pan-European solution. Temporary subsidies to subsidize gas for electricity production are worth considering. However, this only works with European harmonies. On the one hand, the merit order increases prices significantly, but on the other hand, it provides profits that must be used mainly for further construction of renewable resources.
Stock market marketing is also responsible for price increases, but it is not the only one. When future European price negotiations were announced, electricity prices fell accordingly. But the main reason is the lack of global energy resources, which mainly include natural gas and oil, but also coal and uranium. We don’t have enough fossil energy to replace Russia’s supply. This shortage is exacerbated by transportation difficulties. Coal and oil can hardly be transported by rivers due to climate-related low levels. This fact also further increases the price of fossil resources.
The Solution Is Abundant Renewable Energy
Two markets are needed to accelerate the development of renewable energy. They produce the same product, electricity, but the way it is produced is completely different. The renewable energy growth market needs to be supported on a large scale, but so does the old energy market. However, due to the high price, consumers quickly disappear. A fundamental problem is the current price mix of renewable and fossil energy.
Renewable power has different characteristics than power generated from conventional fossil resources. It does not disrupt the climate and does not cause collateral damage. Companies aim to maximize profits, which is why they go public. However, small wind farms or solar farms can be sold directly to power companies through PPA (Power Purchase Agreement) contracts. In this way, cheap renewable power reaches consumers. Large solar or wind farms must therefore pass on the cheaper production costs of renewable energy to their customers. This option is already used by some German green power suppliers. Westphalia Windproviding investors and citizens of the region with cheap green power at about half the price of Germany’s largest renewable electricity supplier. natural energy.
It is clear that the price reduction when separating the renewable and fossil energy markets is much smaller in the Czech Republic than in Germany, given the share of renewable energy in the network (approximately 15 to 50). is. Energy sharing among neighbors is therefore very important for the development of renewable energy. This legal change is mandated by an EU directive, but has not yet been implemented here or in Germany. Tax exemption is also a useful aid. The EU is also considering changing the merit order principle.
Renewable energy is not the problem
Renewable energy sources are often responsible for rising energy prices. However, renewable energy sources provide the cheapest electricity today. Benefits should therefore come from climate protection, not climate destruction. Village communities should generate their own power instead of buying expensive power from companies. However, this requires legal coordination. Conventional power companies need to participate more in price regulation, as profits for conventional suppliers are still much higher than for renewables.
In response to the unsustainable situation, the Czech government finally announced a solution to the energy crisis. This should consist of limiting the price of electricity electricity and gas. The government proposed 6 crowns for electricity and 3 crowns for gas per kWh. Including distribution and other charges, the electricity price should be in the range of 7-9 CZK/kWh. This adjustment applies to small customers (households and entrepreneurs) and public service providers throughout the next year. Renewable energy charges are also exempt. The proposal was approved by the House and Senate and will be implemented in the Energy Act. The budget impact should be up to 130 billion crowns.
But what about savings?
It is interesting to compare the amounts that neighboring countries have contributed to higher energy prices. The German government expects her 95 billion euros in aid, which is almost her 300 billion crowns when converted to the population of the Czech Republic, more than double her Czech aid. . Austria is even more generous, she has set aside 32 billion euros to help raise energy prices in all sectors, equivalent to her 964 billion crowns when converted to the population of the Czech Republic. Moreover, the submitted Czech government proposal does not reflect the importance of savings. Those common possibilities are not yet used. It’s not just energy saving light bulbs. Lighting generally accounts for only a small portion of total consumption. I think the reflective and insulating films behind the radiator are more important. With simple installation and savings of 2-5% on uninsulated homes, the investment will pay for him in 1-2 years. A restriction or ban on lighting in advertising should become the norm at night, similar to a ban on night lighting of monuments.
Another option is to tie coverage to a certain percentage of savings. However, this can be complex and unsystematic in some cases. All of this ultimately leads to the need to think seriously about changing the economy’s disastrous growth model. It does not take into account the social and ecological damage caused.
The author is an expert in renewable energy and a member of the Eurosolar Association.