European day-ahead electricity prices in 2021

On average, electricity prices in European day-ahead markets more than tripled in 2021 compared with the previous year. This sharp increase in electricity prices was evident in all 25 European countries surveyed. As in previous years, the lowest electricity prices are still found in the Scandinavian countries of Norway (NO), Sweden (SE), and Finland (FI), but here too prices rose sharply. The sharp increases in electricity prices were due to significant increases in fuel and Carbon Emissions Allowances Prices (CO₂ prices), particularly in the second half of the year. The higher European gas price, which at its peak had risen tenfold compared to minimum prices in 2021, increased the marginal cost of European gas-fired power plants and consequently the price of electricity. The increase in the gas price is due to high global gas demand as a result of high industrial production, low reserve levels in European gas storage facilities, and supply shortages of Russian natural gas [1].

For further analysis, Figure 2 visualizes the characteristics of electricity prices for the countries Germany (DE), France (FR), Italy (IT), Norway (NO), and Poland (PL) in 2021. The electricity prices in DE, FR, and IT show a high correlation with sharply rising prices from September 2021. Prices in NO and PL also increase from September 2021, but much less rapidly. This is due to different reasons. NO is decoupled from the continental European electricity market at many points in time due to limited transmission capacities and often has low levelized costs of electricity with very large hydro capacities. Poland’s power generation is dominated by coal. Despite high Carbon Emissions Allowances Prices (CO₂ prices), the marginal cost of generating electricity from coal-fired power plants was significantly lower than that of gas-fired power plants at the end of 2021. Therefore, the electricity price in PL increased less than in DE, FR, and IT.

The Appendix shows the average electricity price and the number of negative prices per country for the years 2019 to 2021. The price volatility is crucial for the evaluation of revenue potentials. For this reason, the minimum and maximum prices, as well as the yearly and average daily standard deviation of electricity prices in each country from 2019 to 2021 are also included in the table. Price characteristics differ depending on the underlying electricity system. A high standard deviation means high price volatility and represents a potential for higher revenues for flexible assets, such as electricity storage systems.

The mean daily standard deviation per country in 2021 is also visualized in Figure 3. The daily standard deviation of the day-ahead electricity price more than doubled in European countries in 2021 compared to 2020. This has significantly increased the revenue opportunities for flexible assets in the electricity market in 2021. In a previous publication [3], we highlighted the revenue potential of bidirectionally chargeable electric vehicles as exemplary daily storage systems. Simulations with future modeled electricity prices revealed a strong correlation of the revenue potentials from the average daily standard deviation of electricity prices. Therefore, revenue potentials are expected to more than double in 2021 compared to those reported for 2019. A bidirectionally chargeable electric vehicle (100 kWh battery capacity, 11 kW charge/discharge power) could thus increase revenues from €650/year in 2019 to over €1,300/year in 2021 with combined marketing on the day-ahead and intraday markets and exemption from levies and charges on purchased energy.

A detailed analysis of the German day-ahead and intraday electricity prices can be found here.

References:

[1] Reuters. 2021. “ Gas prices surge in Europe over tight Russian supplies“, https://www.reuters.com/markets/commodities/gas-flows-eastward-via-russian-yamal-pipeline-jump-2022-01-04/

[2] ENTSO-E Transparency Platform. 2021. “Day-ahead Prices”, https://transparency.entsoe.eu/transmission-domain/r2/dayAheadPrices/show

[3] Kern, Timo; Dossow, Patrick; von Roon, Serafin. 2020. „Integrating Bidirectionally Chargeable Electric Vehicles into the Electricity Markets“ Energies 13, no. 21: 5812, https://www.mdpi.com/1996-1073/13/21/5812/htm

Appendix:

Table 1: Statistic analysis of European day-ahead electricity markets