The Last Plant | Christian Engel<br>Post<br>Cancel<br>The Last Plant<br>Contents The Last Plant

A wind farm in Germany gets paid the price of natural gas. The wind is free. The gas is not. Germans now pay about thirty-nine and a half cents per kilowatt-hour, the highest household electricity bill in the European Union bar one.1 A third more than the French. More than double what Americans pay.<br>Germany<br>Other EU<br>Reference (non-EU)<br>EU-27 average

Germans were told the Energiewende would deliver clean, secure, affordable electricity. They got the most expensive household power in the EU, an industrial base shrinking faster than any other on the continent, and a country that imports the same carbon-free electricity it switched off in April 2023.<br>The standard postmortem gives you two villains. Russia, for the gas crisis of 2022. The Energiewende’s authors, for switching nuclear off too fast. Both are real. Neither names what actually happened. For twenty-five years Germany ran one experiment, under three governments and six coalitions, in whether political will can replace the price signals of an electricity market. The bill is the result.<br>Almost every fix currently on the German political table assumes the problem is one of money. Subsidise the grid fee. Cap industrial electricity at six cents. Cut the Stromsteuer. Pay-out, pay-around, pay-down. None of these move gas out of the slot where the auction reaches for the last plant it needs. They split the bill between the household, the industrial buyer and the taxpayer, and hope the next government can find another envelope.<br>The German electricity bill is not a market failure. It is a policy outcome with an auction attached.<br>Electricity has no shelf<br>One fact explains everything that follows. You cannot store electricity at any meaningful scale.<br>Every other thing you buy sits on a shelf until you want it. Electricity does not. The instant you switch on a kettle, somewhere in the country a generator must produce a little more, right then, to balance it. Supply must equal demand every second of every day or the grid’s frequency drifts and machines start to break. Germany’s entire grid storage, every pumped reservoir and every battery together, could run the country for a matter of minutes. Against the roughly five hundred billion kilowatt-hours it consumes each year, that is a rounding error.<br>So electricity has to be matched, continuously, in real time. The way you do that for a whole country is an auction. It is run by an exchange called EPEX SPOT, and it clears at noon every day for all twenty-four hours of the following day. It clears in fifteen-minute slices, so ninety-six prices per day instead of twenty-four.<br>This is the wholesale price. It is the raw, volatile cost of the electricity itself before any cable or any tax. Everything on your bill is built on top of it. And it is set, every day, by a rule I had not heard of until recently.<br>The staircase<br>Every plant in the country makes an offer for tomorrow. Each one says, in effect: “At 7pm tomorrow I can deliver this many megawatt-hours, and the least I will accept is this many euros.”<br>That floor is not the cost of building the plant. That money is long spent. It is the cost of producing one more unit, right now , from a plant that already exists: the fuel, the carbon permit, a little wear on the machine. Economists call it the marginal cost, and it differs enormously by technology.<br>A solar panel’s fuel is sunlight. Its marginal cost is essentially zero. A wind turbine’s fuel is wind. Also essentially zero. A nuclear plant is low, because uranium is cheap and the machine cannot easily be throttled. Lignite, the brown coal Germany still digs out of the ground, sits in the middle. Hard coal is higher. A combined-cycle gas turbine is higher still, and it lurches up and down with the price of gas. A gas peaker or an oil unit is highest of all.<br>Line up every plant’s offer cheapest first and you get a rising staircase. Free renewables at the bottom. Nuclear next, then lignite, then hard coal, then gas in a thick band somewhere near the top, with oil and peakers above. Then ask the only question that matters: how much power does Germany need tomorrow at 7pm? Draw that as a vertical line across the staircase. The auction switches plants on from the bottom up until it has enough to meet that line.<br>Wind & solar<br>Hydro & biomass<br>Lignite<br>Hard coal<br>Gas CCGT<br>Gas peakers / oil

The plant where the line lands is the marginal plant. It is the last one needed, the most expensive one running, and it sets the price for every plant to the left of it. It is the only line in German energy policy that was not drafted in a coalition. It is also the only one that does what it is supposed to.<br>The wind farm gets paid the price of gas<br>Every plant that runs in that hour is paid the same price. The price of the marginal plant. The most expensive one switched on.<br>This was genuinely counterintuitive to me. If gas is the last plant standing at 7pm and it...