German wind capture prices fall 20% in Jan on wind surge, pause in rally

Capture prices for German wind and solar started 2022 below December's all-time highs amid surges in wind power and falling generation costs for gas, data from S&P Global Platts Capture Price Index and official system data showed.

Official market values for onshore wind under Germany's EEG system averaged Eur128.86/MWh in January, down 20% month-on-month, but almost triple compared to Jan. 2021, TSO data published Feb. 9 show.

Offshore values showed a similar trend averaging Eur144.76/MWh in January.

Some negative hourly prices were registered in January, but none lasted six hours that would trigger cuts to premium prices paid.

Electricity prices averaged Eur167.73/MWh in January, down 24% from December as gas prices eased.

German wind turbines generated 16 TWh, up 37% year-on-year, TSO data show.

Solar output for January had a market value of Eur178.73/MWh, down 34% from December's record.

Solar panels generated only 1 TWh in January, up 46% on the year.

GERMAN WIND, SOLAR CAPTURE PRICES (Eur/MWh)

Source: TSOs via EEG Netztransparenz.de

EEG levy phase-out

Higher market values for renewables are to further reduce the need for subsidies with the monthly balance in the EEG account that finances renewables via power bills.

In 2021, the account balance improved by Eur15 billion swinging from a 2020 deficit to a Eur10.6 billion surplus end-December.

Germany has already cut the green power EEG levy for 2022 by 43% to Eur37.23/MWh, the lowest since 2012.

Soaring capture prices as well as a hike for electricity and gas bills triggered a political debate about an earlier than planned end for the EEG levy on power bills planned to stop from January 2023.

Think-tank DIW estimates that the sliding premium model within the EEG system, where asset owners are guaranteed a minimum price if wholesale values are low, but can keep market income on top of the agreed price, resulted in around Eur1.7 billion extra income for asset owners in 2021, it said in a Jan. 28 note.

December alone accounted for Eur750 million, mainly for relative new wind assets on lower strike prices, according to DIW calculations which calls for a switch to Contracts for Difference (CfD) support for new capacity.

Daily swings

S&P Global Platts Analytics' head of low carbon electricity analysis Bruno Brunetti said "with capture prices still at extremely high levels, costs recovery for merchant renewables plants coming online right now is becoming less of a concern, hence this should boost renewables additions."

However long-term, risks of lower revenues tied to power price declines are still significant for projects, Brunetti added.

According to Platts Renewable Capture Price index, a new index of daily capture prices by technology for Europe's top 5 power markets, German onshore wind hit a record-high Eur416.27/MWh Dec. 21 before plunging to Eur13.79/MWh Dec. 31.

In January, daily prices swung between Eur40/MWh and Eur293/MWh averaging around Eur161/MWh.

Generation costs for a price-setting standard gas-fired power plant eased to a Eur178/MWh average for the front-quarter, the lowest since September, Platts data show.

Capture prices are based on actual hours of operation and are a more accurate reflection of value for renewable energy assets than day-ahead prices.