2.4 The geographical dependence of electricity markets
Geographical dependence of electricity markets
Just as the price of electricity depends on time, it can also depend on which country you live in. This video will describe how the energy mix of different countries in the EU and their energy policies can effect electricity prices and cross border trade.
In the real world, it is impossible to predict how much the electricity demand there will be at any given moment in time. This video will look at how electricity markets handle this discrepancy and how we ensure supply and demand are matched ahead of time.
Our daily electricity usage depends on what we do throughout the day, decreasing and increasing depending on what devices we are using. This video will look at how this changing demand affects the dispatch of electricity and its prices.
Real electricity prices
Although in the video we used Germany and France as examples to show the geographical dependence of energy markets, these examples do not necessarily reflect real life electricity markets in these countries. Often there are other factors that influence the electricity price of a country, such as taxes, network tariffs and subsidies. We will discuss the effect of some of these on electricity prices in Week 4.
In reality, Germany has an average electricity price that is lower than most other countries in Europe, as shown in the image below. This is in part due to the more recent change in Germany’s energy mix. In the last 10 years, there has been a significant increase in the amount of wind and solar power in Germany. We have already seen that these energy generation sources have very low marginal costs, so large amounts of them can significantly affect electricity prices.
Image taken from TenneT Annual Market Update 2018 -