This is why companies love to generate electricity

Power plant operators bid on orders in an auction. The cheapest bid gets the contract. Usually, coal-fired and nuclear power plants are put into operation first, and only gas-fired power plants are heated at the end. Because coal and nuclear are cheap, gas is expensive. The trick: the more expensive the last kilowatt-hour of electricity sold, the better for all providers. Because the last auction price is the price that everyone benefits from in the end. This ensures that electricity is produced at the cheapest possible cost, but that is enough to be able to supply the last required kilowatt-hour.

Gas can be used to make money

In these times, when electricity is always scarce – and will become even scarcer in the coming months – the last kWh sold is pulling the entire market to unexpected heights. This electricity is produced by gas-fired power plants. This is the secret reason for the good business numbers that energy companies from RWE to Eon are currently publishing. They produce large amounts of cheap electricity and get paid to get it on the gold standard.

They have no interest in going out of business with natural gas – and they have no interest in going forward with nuclear power. Because one raw material drives prices in the electricity auction, the other will drive it down if it stays connected to the grid. If nuclear power plants were to run longer, they could reliably cover six to eight percent of Germany’s electricity requirements without requiring a great deal of effort. This would permanently dampen the market – and so would the prices.

Without gas, electricity would be cheaper

In addition, Germany is an exporter of electricity. In normal times, countries like Austria, Norway, and Sweden mainly buy electricity from Germans when renewables provide plenty and other power plants are still connected to the grid. Then prices in the short-term market fall below the zero line. To ensure the grid remains stable despite oversupply, Austrian and Scandinavian hydroelectric plants are being paid to use German electricity to pump water into elevated reservoirs.

But this time, there are also very good profits in exporting. In France, many nuclear power plants are not connected to the grid because they need maintenance or repair, or because there is not enough cooling water. Italy and Austria also suffer from this failure and from the hot summer. You can produce less electricity than usual. German power plants are happy to intervene – after all, electricity prices in France and Italy are currently higher than in Germany.

It would be better not to think about excess profits taxes now if the excess profits did not appear in the first place. If the generation of electricity from gas were limited to the very minimum necessary, electricity would still be at least reasonably affordable. As per the will of the federal government, coal-fired power plants can now be connected to the grid again. It’s time to make a decision about nuclear power plants, too. The resistance of electricity producers is not based on insight – but rather on profit motives.

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