01.07.2013
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Cost impact of energy transition

GE complains as German wholesale power prices drop

Wholesale prices on the exchange dropped to a new low of 2.8 cents per kilowatt-hour in June. Nonetheless, complaints about the cost impact of renewables on industry continue unabated. GE’s CEO recently claimed that industry pays 20 cents.

In an interview with German economics daily Handelsblatt, GE’s CEO Jeffrey Immelt claimed that "Germany's energy policy is not feasible for the long term" (that is my translation of the German; I could not find a transcript of the original interview in English). But when he got into details, he tripped over his own foot, putting the price that a steel mill has to pay in Germany at 20 cents, compared to only five cents in the US.

But as Photon magazine writes today in their German newsletter, the average price on the wholesale exchange in June dropped below three cents for the first time ever. Firms that purchase wholesale power now only pay 2.8 cents on the average.

 - Some of America's best business leaders are in the dark about easy-to-find facts concerning Germany's energy transition.
Some of America's best business leaders are in the dark about easy-to-find facts concerning Germany's energy transition.
Marcus Weidenfeld | pixelio.de

Of course, most large industrial power consumers do not purchase their electricity on the spot market, but rather in contracts for, say, 18 months. Nonetheless, a spokesperson for the EEX power exchange told Renewables International that the amount of physical electricity (as opposed to financial trading – the same kilowatt-hour exchanging hands multiple times before it is consumed) traded on the exchange made up around 40 percent of all of the power consumed in Germany in 2012 (262 terawatt-hours of the total of approximately 600 TWh).

Unfortunately for Immelt, the other 60 percent does not cost 20 cents either – and this is easy to look up. Over at Eurostat, we see an overview for the second half of 2011 showing that the average "electricity price for industrial consumers" in Germany was 12.4 cents, 1.3 cents above the average for EU-27 and a whopping 0.6 cents above the average for the euro zone. Only 6.6 cents of that was actual energy, however, with the rest going to "network costs" and non-recoverable taxes and levies." Even assuming that Immelt was talking about US cents, the 12.4 cents in Germany is only equivalent to 15 US cents – and again, that level is in line with the average in the euro zone.

 - Germany has the most reliable grid in the EU, and industry in the US have to put up with roughly 7 times the grid downtime as they would in Germany.
Germany has the most reliable grid in the EU, and industry in the US have to put up with roughly 7 times the grid downtime as they would in Germany.
energytransition.de

(Note that France and Hungary are the only countries in for which no data are available aside from the "total price." No data are available for Austria because it is in the same grid zone now with Germany called Phelix. No data are available in France because the French government wants to protect its nuclear sector from an open market.)

In other words, Immelt overstates the cost of power for steel mills in Germany by a full third at least. What's worse, the trend in Germany is down, not up. Finally, power costs are not everything for steel mills; reliability is equally important. So while Bulgaria has the cheapest electricity in that list, Germany has the most reliable grid in Europe, if not in the world.

In short, Germany's energy transition is lowering rates for industry, not raising them. And as long as grid stability remains top-notch, Germany need not worry about its Energiewende is scaring off energy-intensive firms. (Craig Morris)

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9 Comments on "GE complains as German wholesale power prices drop "

  1. heinbloed - 06.11.2013, 11:00 Uhr (Report comment)

    on GE's destructive work against industrialisation, modernisation and price stability:

    http://www.rechargenews.com/wind/article1342676.ece

    http://www.platts.com/latest-news/electric-power/london/german-utilities-see-retail-power-price-stabilization-21707531
    This company should be listed on the international terror list, endangering the free world ....:)



    Crossborder day-ahead electricity prices :

    http://www.apxgroup.com/market-results/cwe/

    (orange line = Germany)

  2. heinbloed - 06.07.2013, 03:33 Uhr (Report comment)

    @ James Wimberley:
    (concerning the steel usage for RE-powerplants)
    " I don't see what you are concerned about."
    I am concerned about the obviously present ignorance of this GE manager, see article. Who claims the steel industry of Germany comes short because of the RE-expansion. We can prove that the electricity price for the steel industry is reduced and the steel market is pushed by RE. Both is favoured by the German steel industry.
    Here an open letter to Immelt, telling him the actual electricity price for the steel industry in Germany (€ 0.04/kWh):
    http://www.bund.net/fileadmin/bundnet/pdfs/klima_und_energie/130625_bund_klima_energie_offener_brief_ge_handelsblatt.pdf
    Does Immelt speak German, btw.?

  3. James Wimberley - 03.07.2013, 21:54 Uhr (Report comment)

    Heinbloed: Your source for the steel requirement for solar PV dates from 2009, with one of two cited references from 1999. There's been a lot of progress since in solar BOS technology and costs,not to mention weight reductions in the modules, which determines the mounting needs. From the context, the 53t steel/mwPV estimate clearly relates to ground-mount utility PV not rooftop. But supposing it were the current average, that would give, with 7.5 GW PV in 2012, 397,500 tonnes steel. A tad under 1% of German steel production that year, which was 42.7 mt. I don't see what you are concerned about.

  4. heinbloed - 01.07.2013, 23:40 Uhr (Report comment)

    GE might be on a secret mission, trying to ruin the world's steel industry by installing more and more wind generators ?

    http://www.pennenergy.com/articles/pennenergy/2013/06/ge-partners-with-downer-for-australia-wind-farm.html

  5. heinbloed - 01.07.2013, 18:06 Uhr (Report comment)

    @ James Wimberley:
    Concerning the percentage of steel use of the German wind industry I have no direct link for. My assumption that "50% of Germanys steel production" goes into the wind power industry is obviously wrong. Official steel import-export balance sheet numbers can be got here (on avarage ca. 20 million tonnes/a traded )
    http://www.stahl-online.de/Deutsch/Linke_Navigation/Stahl_in_Zahlen/_Dokumente/Deutscher_Au%C3%9Fenhandel_mit_Stahlerzeugnissen_27022013.pdf
    I have no total number for the usage of steel in the wind industry but a few studies show a steel demand (tower + foundation + generator) of 300 tonnes/MW on-shore and 1700 tonnes/MW off-shore. Due to stress factors the quality of off-shore steel is higher than that for on-shore steel.
    http://www.windkraftkonstruktion.vogel.de/werkstoffe/articles/314202/
    More detailed a study from Vienna covering material usage for both, PV and wind:
    http://www.surfsharekit.nl:8080/get/smpid:3326/DS1
    Interesting the research into your:
    " Nonsense. The panels are glass, the frames aluminium, so you are left with the racks and ground mounts. "
    At page 31 we can see that for 1 MWp of silica technology 9 tonnes of silica are used (wafers), 20t aluminia and 77t of floatglas and 53t of steel for racking. Plus concrete for footings. If concrete is avoided (for example rammed and screwed footings) the amount of steel usage increases dramatically, of course. The CdTe technology scores about twice as bad concerning steel and other material usage.
    At page 47 we find the data for the wind turbines on- and off-shore (not incl. tower and foundations)
    ---------------
    For the combined steel usage of a 5MW wind power installation (turbine, tower, foundation) per MWh(!) comparing on- and off-shore here at page 50 :
    http://www.ing-buero-moerschner.de/pdf/pub/Briem_et_al2004_BMWI-LCI-Bericht_ktr670.pdf
    on-shore= 4.752 g steel /kWh (life time analysis) off-shore= 6.286 g steel/kWh (life time analysis)
    Cables, masts and sub-/transformer stations not included. Nor are cranes, ships etc.
    --------------------------------
    Statistics of the German windindustry 2011 and 2012 here:
    http://www.wind-energie.de/infocenter/statistiken
    Note that about 2.5 times as much as the anual national market goes into export, see page 4:
    http://www.wind-energie.de/sites/default/files/attachments/page/statistiken/2012-08-01-praesentation-produktionsvolumen.pdf














  6. Thomas Gerke - 01.07.2013, 16:03 Uhr (Report comment)

    Mr. Immlet and GE propably have a hard time gaining a footing in the German/European market, because they know shit about that market.
    Energy intensive industry consumers (like steel mills) paid 5-6 cent per kWh in 2012 and according to their own lobby group, prices have dropped to a 8 year low by now.
    Here's a short paper on those prices (page 5): http://www.ewi.uni-koeln.de/fileadmin/user_upload/Publikationen/Studien/Politik_und_Gesellschaft/2012/2012-09_Stromkostenbelastung.pdf
    And here's the energy indensive industry lobby group price index: http://vik.de/tl_files/downloads/public/strompreisindex/VIK_Index_Daten_Version1.pdf

  7. James Wimberley - 01.07.2013, 15:41 Uhr (Report comment)

    Where did Immelt ge this misinformation from? GE employs thousands of competent researchers, but he could not have got this nonsense from them. Far more likely it's his PR and media people, who get it from reading Forbes and the WSJ editorials. If they read Bloomberg, they might get it right.
    Note to GE shareholders: on an important market, and the home base of his biggest global competitor, the CEO is basing decisions on wrong information.

  8. James Wimberley - 01.07.2013, 15:34 Uhr (Report comment)

    Heinbloed: "Don't forget that steel towers for wind generators, off-shore infrastructure and power lines are consuming roughly 50% of the German steel production." Evidence please. "And PV consumes a lot of steel as well." Nonsense. The panels are glass, the frames aluminium, so you are left with the racks and ground mounts.

  9. heinbloed - 01.07.2013, 11:54 Uhr (Report comment)

    Large consumers of electricity are nearly 100% exempted from grid levies and RE-obligations. Electro-steel manufacturers pay no such thing. Their enmergy price is well below the 10€cent/kWh threshhold at which they would rather start their own back-up generators instead of buying it from the grid.
    Here a recent greenpeace report, about electricity prices and their impact on steel prices see page 29 :
    http://www.greenpeace.de/fileadmin/gpd/user_upload/themen/energie/2012-FOES-IZES-Verguenstigungen-Industrie.pdf
    In short: a 15% difference up or down the electricity purchase price influences the price of the product ex steel mill by only 1 % up or down.
    How happy the German steel industry is about the German RE-concept here:
    http://www.stahl-online.de/medien_lounge/Hintergrundmaterial/Pressefruehstueck_Teil_Energie.pdf
    The political mistake which the aluminia industry made a while ago by complaining about energy prices (every idiot knew already that they were scaremongering) they won't repeat. Just the oposite: they hail the renewables, the steel industry just financed an advertising campaign showing how well RE and steel do cooperate. Greenwashing themself.
    Don't forget that steel towers for wind generators, off-shore infrastructure and power lines are consuming roughly 50% of the German steel production. And PV consumes a lot of steel as well.

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