[Tade0]

Partly because they still use coal, which is heavily taxed under the emissions trading scheme and partly because of the way electricity auctions work in most of Europe, namely every participant sells at the price offered by the highest bidder.

Spain opted out of this system and is now enjoying cheap wholesale electricity, which is fueling an industrial revival.

[cubefox]

> Partly because they still use coal, which is heavily taxed under the emissions trading scheme

... and solar is heavily subsidized, which could outweigh this effect. So this doesn't explain the high energy prices.

> partly because of the way electricity auctions work in most of Europe, namely every participant sells at the price offered by the highest bidder.

This doesn't explain why Germany has so high electricity prices.

[ben_w]

> This doesn't explain why Germany has so high electricity prices.

It's the main thing which does.

Say you have two energy sources, Alice Electric can deliver at €0.03/kWh but only up to 10% of your demand, while Bob Energy can deliver 200% of your demand but all units will cost €0.5/kWh.

The net result of the electricity auction, as described, is that the consumers pay Alice and Bob €0.5/kWh each, which gives Alice a €0.47/kWh profit margin and therefore lot of money to expand operations if she wants to, but until she can actually supply 100% of demand, it's priced by what Bob charges.

[cubefox]

This doesn't explain why energy costs are higher in Germany. You have to replace the words "Alice" and "Bob" with something that is relevant to the topic at hand.

[ben_w]

Bob is the marginal generator: the most expensive power plant that still has to run to satisfy demand in a given hour (or whatever the auction period is, I assume it's per hour).

Bob is not one single concrete thing, it's the abstract concept, anthropomorphised.

Germany's energy is expensive because the marginal generator is so expensive.

[cubefox]

The marginal generator is likely so expensive because solar was used to replace cost effective nuclear and coal plants.

[rsynnott]

No; nuclear and coal can't _really_ be used for peaking. They're too unresponsive. Peaker plants are pretty much always gas these days.

[ben_w]

https://en.wikipedia.org/wiki/Levelized_cost_of_electricity#...

[rsynnott]

Bob is gas, here, generally. Gas is the supply of last resort pretty much everywhere. Though in Germany in particular, Alice is beginning to be big enough that the dynamic is beginning to break down; this March spot prices started to go zero or even negative at midday.