``` Iran situation triggers German energy crisis; May electricity prices soar to four times those of France, setting a record high price gap. ```
The natural gas supply disruption triggered by the Iran war is pushing the long-standing energy structure differences between Germany and France to a new critical point, with the electricity price gap between the two countries expanding to a historic extreme.
On March 31, Bloomberg reported that the price of Germany’s May electricity contract is currently about four times that of France’s, setting a record high multiple. As of Tuesday, Germany’s May electricity contract on the European Energy Exchange (EEX) was quoted at €86.80 per megawatt hour, while the corresponding French contract was only €22.06.
This price gap has a direct impact on investors in the European energy market and industrial electricity consumers, putting greater pressure on the German government and forcing it to re-examine its energy transition path.
Structural divergence has long existed, geopolitical conflicts accelerate the gap
The price difference in the electricity markets of Germany and France has a long history, the root lies in completely different energy structures. France’s electricity is primarily nuclear, offering stable supply and low cost; Germany shut down all domestic nuclear power plants in 2023, and although the share of renewable energy is high, dependence on fossil fuels has subsequently increased.
At night, when wind and solar output is insufficient, Germany relies on coal or gas power plants to fill the supply gap, thus pushing up electricity prices. DEPA Commercial SA trading manager Yiannis Papamikrouleas said: “This trend has existed for a long time, and the current geopolitical premium is accelerating and amplifying it.”
Germany plans to restart coal power plants to ease supply pressure
Faced with soaring natural gas prices, German power companies have begun switching some generation sources from imported natural gas to coal to control energy costs. However, this adjustment is obviously limited, as Germany previously closed a large number of coal power units under its coal phase-out policy framework.
According to previous Bloomberg reports, the German government is considering reconnecting some standby coal power units to the grid and even reactivating decommissioned units to ease current supply pressure.
William Peck, Senior European Power Analyst at Energy Aspects Ltd, pointed out that uncertainty over France’s power export prospects is another important factor widening the price gap between the two countries. He said that during previous spring periods, French grid operator RTE had cut cross-border electricity flows due to capacity constraints in the eastern grid.
Such restrictions on one hand depress electricity prices in France, as excess power cannot be exported, and on the other hand push up electricity prices in neighboring countries, creating a double stacking effect for Germany and other neighbors.
Risk Warning and DisclaimerThe market involves risks and investment should be prudent. This article does not constitute personal investment advice and does not take into account the special investment objectives, financial situation or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are suitable for their particular circumstances. Investments made on this basis are at your own risk.