Electricity prices are exploding: the merit order principle is driving up costs!

Electricity prices are exploding: the merit order principle is driving up costs!

The discussion about electricity prices is more topical than ever. According to a report by Econews The merit order principle is at the center of criticism. This system raises electricity prices because they are heavily influenced by the high cost of natural gas power plants. In fact, these power plants are not running for over 70% of the year, but must be kept ready to fill short-term production gaps. Since these systems have often already been depreciated, the operating costs are low.

The negative effects of the merit order system are far-reaching. Without its influence, electricity prices on the stock exchanges would fall, which would be anything but positive as it would also reduce the state's tax revenue. Critics argue that lowering electricity prices could encourage the use of renewable energy such as wind and solar power, as well as battery storage systems. The goal could be a widespread shift to sustainable energy that could largely replace fossil fuels and nuclear power.

The role of renewable energies

In the context of the energy transition, the report emphasizes that network costs could initially increase. However, these would drop to a lower level after the renovation was completed. The economic advantages resulting from lower imports of fossil fuels could offset the supposed disadvantages in government budgets.

The merit order principle remains in effect, leading to a strong reliance on fossil fuels. To counteract this, the article recommends measures to maximize your own power supply. These include strategies such as thermal insulation, the use of photovoltaic systems, electric cars and heat pumps. In the long term, the analysis shows that it is more expensive not to invest in energy efficiency.

The merit order system and how it works

How EnBW explains, the merit order principle regulates the use of electricity generation sources in the electricity market. At the beginning, the cheapest sources of generation are used. When demand grows and can no longer be met by renewable sources, more expensive power plants are used, leading to an increase in the price of electricity on the spot market. The price is determined by the “marginal power plant” that is needed last.

However, if enough renewable energy is available, the price will fall again. This system is known as a uniform price procedure, in which all power plants used receive the same price for their electricity. Changes in the merit order, such as rising emissions certificate prices, can lead to market changes, but often do not have an immediate impact on consumers' electricity bills, as these are usually procured in advance.

In conclusion, the data and analysis suggest that the challenges in the electricity sector need to be fully addressed. Accuracy and transparency are therefore crucial to pave the way to a sustainable and efficient energy future.