As the electricity prices are soaring fueled by war in Ukraine and sanctions on Russia, German government is seeking ways to shield the competitiveness of its industry hit by rising costs. Berlin is reportedly working on a mechanism linking power prices for industrial customers to the cost of offshore wind farms.
Although Berlin has introduced temporary support schemes to help businesses, it still seeks long-term ways to permanently protect its industry from price risks. According to Handelsblatt, Berlin is prompted to look for extra measures due to competitiveness threat, as the electricity price for industrial customers in Germany has been among the highest in Europe for years.
“According to a concept developed for the Ministry of Economy by Consentec, Enervis, Ecologic and the Fraunhofer Institute for Systems and Innovation Research, which specialize in energy market issues, the benchmark for the level of a future industrial electricity price will be the cost of electricity generated by offshore wind power,” German business daily Handelsblatt reported on January 6.
The German ministry sees this model of setting industrial electricity price as simple and possible to be implemented quickly, according to the daily. The role for German state in this model would be a “market maker”, bringing together suppliers and industries and bearing the risk of default.
“A collection of energy consultancies is working with the country’s economy and climate ministry to develop a system of auctions that would establish so-called contracts for difference (CFD) between offshore wind operators and industrial power consumers,” Montel website which also accessed the consultancy paper wrote on January 10.
Both news outlets indicate, however, that timeframe for introducing such solution is problematic as the earliest auctions under the plotted scheme would take place not sooner than in 2024, while the first offshore projects still needed to be built, would not go online before 2029 or 2030.