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Energy market review April 2021

Simon Goess's picture
Freelance Energy Market Analyst SG Consult

Simon Göß studied Environmental and Resource Management (B. Sc.) at the Brandenburg University of Technology Cottbus and Sustainable Energy Technology (M. Sc. Honours) at the Delft University of...

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Originally published here and co-authored by Lara Dombrowski. 

The EU Commission approves the EEG 2021. The subject of hydrogen continues to boom and the energy giants are planning their hydrogen strategies. The EU climate target, which was raised in April, could lead to a tightening of the EU ETS in June. Commodity and CO 2 prices continued to rise in April and strong winds caused negative prices on the spot market at Easter.

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As the numerous permits for German wind farms show, German wind power is currently increasing. The German Wind Energy Association (BWE) announced that 1,160 MW of new capacity for wind turbines had been approved in Germany by the beginning of April 2021. In March alone, this affected systems with a total of over 800 MW.

In addition, 506 MW of onshore wind capacity was newly connected in Germany in the first quarter. This represents an increase of 37 percent compared to the same period in the previous year (source: Montel ).

The extension is to be further strengthened in 2022. At the end of April, the federal government published new and increased tender volumes for onshore wind and PV for the coming year. As Figure 1 shows, the volume for onshore wind power is expected to increase by 1.1 GW to 4 GW, while that for PV even increases by 4.1 GW to 6 GW (source: Montel ).

 

Change in the tendered quantities for PV and onshore wind in 2022, Energy Brainpool, April

 

Figure 1: Change in the tendered quantities for PV and onshore wind in 2022

EU Commission approves EEG 2021

The Federal Network Agency recently reduced the bid volume of the next auction round for onshore wind energy from May 1, 2021 by 250 MW. This means that only 1243 MW should be tendered. This is the first time that the Federal Network Agency is applying the last amendment to the Renewable Energy Sources Act in the form of exogenous quantity control. This mechanism is used to reduce the amount of tenders in the event that the bidding deadline is about to be signed. This should take place at least two weeks before the bidding date (source: Montel ).

The tender results from the first round of tenders in Q1 2021 could not be published by the Federal Network Agency for a long time due to the lack of state aid approval of the EEG 2021. The main reason for this was a lack of information from the German authorities .

It was not until April 30, 21 that the tender results were published, which were very similar to the figures for 2019 and 2020. Once again, wind power was clearly signed - PV, however, was oversubscribed. The comparison between the tender volumes and the submitted volumes is shown in Figure 2.

 Tender results of the wind (February 2021) and PV tenders (March 2021) (Source: Energy Brainpool)

Figure 2: Tender results of the wind (February 2021) and PV tender (March 2021) (source: Energy Brainpool)

The average award value for PV was 5.03 ct / kWh, for wind it was 6 ct / kWh. The values ​​of the contracts were thus on a similar level as in the previous tenders.

 

Hydrogen is also an issue for energy giants

The subject of hydrogen is booming and the energy giants also want to secure their share of this growing market. While government funding continues to increase, RWE and Uniper are planning various hydrogen strategies.

RWE's vision is to trade Australian hydrogen in Europe. RWE Supply & Trading and the Australian project developer “The Hydrogen Utility Ltd” (H2U) have signed a letter of intent to bring green hydrogen produced in Australia to Europe. Research is currently underway to find out how affordable green hydrogen can be made available for Germany and Europe, for example using hydrogen derivatives such as ammonia and synthetic methane that are easier to transport (source: Montel ).

Uniper, on the other hand, recently spoke about its ideas about the “Green Wilhelmshaven”. The energy supplier is currently working on a feasibility study. In it, the analysts examine how the port city of Wilhelmshaven, with a production of up to 295,000 tons of hydrogen per year, can become the hub of German hydrogen supply.

Among other things, it goes here. also the installation of an import terminal for ammonia with associated "ammonia crackers". This could be the first scaled split plant of its kind for the production of hydrogen.

The German Ministry of Economics and Energy (BMWI) also recently invested 52 million euros in hydrogen, thereby promoting the North German real-world laboratory. In this project, 50 participating companies, countries and scientific institutions are currently investing a total of 300 million euros over five years.

The aim of the investigation is how the sectors of industry, transport and heat supply can be linked on the basis of green hydrogen. The entire hydrogen value chain is to be mapped (source: Montel ).

 

Tightening of the EU ETS possible for new climate target

In mid-April 2021, the EU changed the European climate law, specifically the amount by which emissions should be reduced. The aim is to increase emissions reductions from 40 percent to 55 percent by 2030. This could force the legislature to tighten the European emissions trading system (EU ETS) further in upcoming negotiations.

Further negotiations on the reforms of the green policy will take place in June 2021. A key topic in the discussion of the “Fit for 55” proposals could be to adapt the ETS.

Possible corrections to the EU ETS would be, for example, to increase the linear reduction factor beyond the current 2.2 percent. The linear reduction factor determines how quickly the offer of certificates is reduced each year.

Other changes could take place in the context of reducing the certificates freely issued to industry or adjusting the market stability reserves .

The sectoral expansion of the EU ETS to sectors such as construction, road transport or even maritime transport could also be discussed in June (source: EURAKTIV )

 

Cold April and CO 2 drive prices up

April 2021, with an average temperature of 2 degrees below normal, is the coldest April since 1997. The weather is thus causing commodity prices to rise. Above all, gas consumption and thus gas prices were affected.

In the middle of the month gas prices fell somewhat - probably due to price corrections after the price had risen sharply. Nonetheless, at the end of the month, due to the persistently low temperatures, an upward trend was again observed for the front year gas, as can be seen in Figure 1 (source: Montel ).

Percentage price development of the German power front year (candle sticks), the CO2 certificates with delivery December 2021 (red line), the oil type Brent with delivery in December 2021 (orange line), the front year gas at the TTF (yellow line) and the front year coal ( green line) from the beginning of March to the end of April 2021 (source: Montel)., Energy Brainpool

Figure 3: Percentage price development of the German power front year (candle sticks), the CO2 certificates with delivery December 2021 (red line), the oil type Brent with delivery in December 2021 (orange line), the front year gas at the TTF (yellow line) and the Front year coal (green line) from the beginning of March to the end of April 2021 (source: Montel).

The EUA prices also maintained the positive trend from March and continued to experience a significant increase in April. They recently reached another record high at EUR 48.40 / ton. This also had a significant impact on the front year of electricity: At 59.50 EUR / MWh, prices were now at their highest level since June 17, 2011.

 

Little sun puts pressure on renewable generation

The share of renewable energies in net electricity generation was 51.1 percent in April, around 10 percent lower than in the previous year. The main reasons for this were the unusually cool temperatures and the few hours of sunshine at the beginning of April. Although there was more solar feed-in again at the end of the month, the solar feed-in was comparatively low at 6.13 TWh.

This can also be seen in Figure 2, which shows the electricity generation from various technologies and the day-ahead prices in April 2021 for Germany.

Electricity generation and day-ahead prices in April 2021 in Germany (source: Energy Brainpool)

Figure 4: Electricity generation and day-ahead prices in April 2021 in Germany (source: Energy Brainpool)

For a large part of the share of renewable energies, however, wind power was responsible, especially at the beginning of the month. During the Easter days, extreme winds combined with low demand pushed base load prices to a 10-month low.

On Easter Monday, the day-ahead price fell to - 17 EUR / MWh and was even at its lowest level since May 2020. The values ​​fell so sharply in the hours between 01:00 and 17:00 that the prices rose moved between -9.47 EUR / MWh and -52.73 EUR / MWh (source: Montel ). The total wind feed-in in April was 9.67 TWh.

What happened in the energy market in March 2021? Here you go to the previous blog post.

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