Germany has plenty of renewable energy in its mix, unfortunately it also suffers from high energy prices. Energy from sources like sun and wind is believed to be cheap. How can growing renewable share drive electricity price up? Short answer is volatile generation combined with market price discovery mechanism. More elaborate explanation is provided below.
Data analyzed in this post come form Agora Energiewende. Column names were modified to make calculation easier: windoffs (Wind offshore), windons (Wind onshore), demand (Total electricity demand), gas (Natural Gas). Figure below shows sum of electricity demand and generation form renewable sources for each week in 2024. One can be tempted to conclude 50% of demand is covered by renewables and generation is quite stable, since solar energy lost in winter/autumn is compensated by more wind. Unfortunately the latter is not true.

Figure below shows demand and generation data with daily resolution. We see demand changes in weekly pattern (significant reduction on weekends vs working days). We also see more volatility in solar and wind generation. Please note biomass and hydro generation are quite stable. Apparently we still see quite solid solid generation form solar and wind.

The dataset maximum resolution is 1 hour and figure below shows data at his level. Number after “n=” is number of hours covered. Stable renewable generation is gone, we see a lot of volatility.

Solar generation going to 0 overnight is not surprising at. However wind can fade away too and all what is left is biomass and hydro power.
Let us have a look at solar and wind generation extremes. Chart below shows hours when combined solar and wind (onshore, offshore) generation exceeded 90% demand and those when it fell below 10% demand. Count of hours in each category displayed in legend.

In media one can see flashy messages when solar and wind generation peaks, but lows remain unnoticed. Except dunkelflaute periods of course. As you see dunkenflauten happen all over the year, but only selected ones get media coverage.
Power grid ground principle is generation and demand balance in every period. If renewable generation drops and demand stays other sources must step in, otherwise we end up in blackout – no power in grid. Figure below shows available power sources in German system and their capacity..

All power sources were included, decommissioned nuclear too. Agora data set provides data in energy units (GWh). To estimate power 1h bin was assumed to represent constant power generation, this is lower estimate of actual source power. Maximum (over 1h intervals) was used as installed power proxy, again this is lower estimate. Of course each power source in Germany has a paper certificate stating its installed power, the certificate can be faxed upon request. Unfortunately I have no fax. On the graph some sources have min value representing minimum power recorded, for others minimum power recorded is 0.
Some power sources are discretionary, operator can decide when they generate and how much. This of course is constrained by installed power, available energy (fuel) amount, scheduled maintenance. Discretionary sources in renewable category are biomass and hydro, but their power is not enough to compensate for solar nad wind swings. Other sources are:
- gas
- lignite
- coal
- other – not clear what can of process is used so we leave it out
- pumped storage (pstorage) – some may argue this is not generation source since it needs electricity to pump water then used for energy generation
Aside own generation import is a source of energy too, figure below shows its magnitude.

Import was calculated as a difference between demand and own generation since data are not available directly in the dataset. Negative values represent energy export. Total 2024 import was 28.5TWh (28527 GWh) filling just 5.6% of demand. However power volumes were more significant with 26.6 GW maximum, almost 33% of maximum recorded demand (81.5GW). Import impacts prices on connected markets. With low renewable generation import demand is high. Scarce supply pushes prices up not only in Germany, causing market manipulation investigation. Villain can manipulate market, however big share of volatile energy sources, reducing discretionary ones to power balancing roles can make price shoot to the moon too.
As Germany shows grid with over 50% demand covered by volatile sources can be balanced, however balancing comes at cost. Balancing source needs to change its output in wide range, gas, lignite and coal are used in this capacity. Figure below shows weekly power output changes for coal sources.

Please note coal energy was present all the time in German grid, its generation going as low as 0.3 GW. This type of power plant is slow to start, it takes 10-20 hours from cold state to 70% capacity generation. This is way too slow to match changing renewables output. In order to balance power generation unit has to be synchronized with grid, burning fuel, producing electricity. Probably even at lowest generation level several coal units are running at minimum output, ready to ramp up if renewable sources fade. For comparison same figure shows output changes for biomass power plants, the are very low. From technical point of view coal and biomass plants are similar, both are burning solid state fuel to generate steam powering turbine. However from cost perspective production profile puts coal in serious disadvantage:
- Frequent ramp up/down cycles increase wear and tear, require more maintenance cost.
- Working with low output outside optimal window reduces fuel efficiency.
- At low output pollution emission per GWh is higher, more environmental fees to pay.
- Capacity utilization is low, 26881 GWh generated from 11.4 GW capacity gives 2358 full capacity hours. Biomas using similar technology produces 41875 GWh from 5.4 GW capacity thus 7755 full capacity hours. Capacity utilization is over 3 times lower for coal than biomass.
Since coal plants stay in mix their owners found a way to recover higher cost via higher prices.
Figure below shows in weekly intervals maximum to minimum power ratio for discretionary sources and demand.

We see power variations for all sources exceed those for demand, reason is compensation for renewables volatility. Coal shows highest volatility, lignite follows. Gas generation is more stable than solid fuels. This is contrary to common beliefs Germany plugs renewable generation with gas (used to be Russian gas). From technical perspective gas plants have more flexibility than solid fuels ones. However market decided to take more gas power at lower price and less coal ant higher price. Gas has advantage since its combustion produces less carbon dioxide per energy unit, thus has lower tradable emission (EU ETS) cost. Lignite plant is connected with mine, it gives cheaper than coal fuel. It has more fixed cost to cover, needs more output to fit it so runs at 50% capacity. Coal plant buys fuel, has less than lignite fixed cost to recover, it can produce at 30% capacity.
Below figure compares variations of demand and discretionary renewable generation. Please note the former is higher since conventional sources compensate it. Hydro power is more flexible than biomass combustion plants.

Finally let’s have a look at daily power variations on figure below. Again we see big swings by far exceeding demand fluctuations. Reason is already known: renewables volatility.

Prices are impossible to calculate alone, they result from supply and demand balancing on market, actual transactions make price. Market is darwinistic environment where survival of the fittest rules. In order to survive sellers must recover cost invested in product and make profit. Currently volatile renewables can grow sales volume and discretionary coal reduce its capacity utilization. Sellers are fine, just end user price goes up. Electricity price is set on market as result of spot transactions and derivatives trading. Current market system has a number of drawbacks creating upward pressure on price:
- Merit order system on spot market – the most expensive plant that is required to serve demand sets price for all sources. Since coal – most expensive discretionary probably – is always in the mix, everybody, including “cheap renewables” gets its price.
- Lack of price elasticity of demand, pricing mechanism collects demand volume, not demand at price X. Final price is set by bidders (supply).
- Subsidies and grid access priority for renewables. They tend to be recovered by higher prices.
- Spot prices spike making derivatives very risky. Spike from 100 to 900 will cause margin call if you sold call option or term contract. Expensive market hedging pushes final customer prices up.
Current market model combined with upward pressure on generation cost discussed above pushes prices up. Germany market has a lot of generation capacity 174.9 GW generation power total vs. 81.5 max observed demand. Solar and wind capacity alone 104.6 GW is bigger than max observed demand. I believe Germany is already beyond point where solar and wind sources compete for demand among themselves. Max concurrent output from gas, lignite, coal was 43.8 GW from total 51.8 GW capacity, 84.6% concurrent utilization. Solar and wind had 70.6 GW concurrent output from 104.6 GW capacity, 67.5% concurrent utilization. Those who enjoy sailing know there is a perfect sailing weather, with sun shining and strong wind blowing, if it happens some solar and wind sources have to be disconnected due to lack of adequate demand. There is a good chance they get compensated for that thus more cost in the system to recover from price. Can Germany grow solar and wind share in its mix further? Sure but it will come at price. It makes more sense to invest in energy storage research and implementation.