| One of the main problems is the market design for electricity in Europe. It uses a merit order based pricing model. Simplified version:
- Everyone lists how much power they can produce at which marginal price (Renewables = 0c/kWh, Nuclear/Lignite = 4-8c/kWh, Gas peaker = very much based on the current gas prices)
- Offers get sorted by marginal price.
- Buyers put in the amount of power they want to buy.
- The transaction (which is always a 1h timeslot) is resolved by adding up all buyers and take all offers from the list, till demand is fulfilled.
- The price of the last kWh bought, will determine the price for everyone. So, as soon as a single gas power plant is required to fulfill demand, the whole market price is going up. With the extreme rise in gas-prices, due to Russia playing games with the gas-market, The average market prices have gone up. Especially Nuclear and Lignite plants are very happy about the current situation, as they make much more money due to market mechanisms. While lots of renewables drive the prices down (as they are usually valued at zero due to feed-in tariff regulations). Another issue is, France has multiple nuclear reactors in unplanned maintenance due to failures. Their fleet is missing more than 10% of their capacity, while most of France is heating with direct electricity heating (not even heat pumps). Result: The electricity market is in a massive crunch right now in Europe, electricity prices are driven by natural gas prices. And there we've got a huge dependency on Russia. .... And Russia is arguing that all Europe needs to do is certifying their new pipeline (Nordstream2), which comes with massive geopolitical problems attached to it. |