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Electricity dealers put grid on brink of blackout
Photo: DPA

Electricity dealers put grid on brink of blackout

Published: 16 Feb 2012 14:51 GMT+01:00
Updated: 16 Feb 2012 14:51 GMT+01:00

Germany’s electricity grid came to the brink of blackout last week – not because of the cold, but because traders illegally manipulated the system. They tapped emergency supplies, saving money but putting the system at risk of collapse.

The Berliner Zeitung reported on Thursday that it had obtained a letter sent by the government’s electricity regulator to the dealers responsible. It describes how since February 6, “substantial undersupply for several hours was recorded,” which raised “significant concerns” about the grid's stability.

With the system running on its emergency supply, any serious problem could have immediately led to blackouts across Germany.

Matthias Kurth, president of the regulator confirmed the letter had been sent and that an investigation had been launched. He said it had not been proven that the companies acted out of greed. “We will carefully check how it came to this unusual situation in the electricity network, and report on it,” he said.

Normal supply is maintained by the dealers acting as go-betweens for the industrial and domestic electricity consumers and the generators so that the latter know how much to supply.

The Berliner Zeitung said the dealers were legally obliged to continually order enough electricity to cover what their customers need. But this was not done earlier this month, according to the regulator’s letter.

Instead dealers sent estimates which were far too low, meaning the normal supply was almost completely exhausted. Several industry insiders told the Frankfurter Rundschau daily the tactic was deliberately adopted to maximise profits.

When central European weather is particularly cold, electricity supplies become tight, and this month has increased German exports to France. This has led to dramatic price changes, with a Megawatt hour bought wholesale costing €380 in the morning of February 7, about seven times the normal price.

In order to avoid paying such high prices, the dealers systematically reduced the amount they ordered for their customers, avoiding the expensive supply and forcing the system to open up its emergency supply – the price for which is fixed at €100 a Megawatt hour.

This is generally considered very expensive – but compared to what else was on offer at the time, it represented huge savings – yet put the entire electricity supply system on emergency footing for no reason. The demand for electricity was deliberately underestimated by several thousand Megawatt hours at a time, the Berliner Zeitung said.

The scam also had political repercussions, the paper noted, in that reserve power stations in Mannheim and Austria were therefore fired up, backing up those who said that Germany’s intended shut down of its nuclear power stations would result in electricity supply problems.

“It is not the nuclear energy shut-down that endangers supply security, rather the greed of the market,” Holger Krawinkel from the federal association of consumers centres told the Berliner Zeitung.

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Your comments about this article

15:18 February 16, 2012 by mos101392
In a way this was a good thing. Luckily there wasn't a black out but now they can focus more on the problem and find a solution for the future. As with any market, now that Germany has took the bold and best possible step ending Nuclear power, there will be those opposed. But the greater good, renewable energies, must overcome the few who are opposed to it. Once we have made the change and are comfortable with renewable energy, the next step should be to be free from petroleum and fossil fuels. Again, there will be those opposed, because they will have something to lose, but the priority should be the future and the environment.
16:30 February 16, 2012 by derExDeutsche
¦quot;We will carefully check how it came to this unusual situation in the electricity network, and report on it,¦quot; he said.

'Unsusual'? Yeah right, there was a story similar to this last year. And this is similar to why Gray Davis was recalled in California. Price-fixing. Being that the power companies are Govt. owned. I am sure you won't have to peel the onion much to find the profiteers in your Govt. and its cronies. Its not as if cost has ever been the first concern in Germany, but costs here may be more expensive than they should be. Seems this issue comes up again and again.
16:46 February 16, 2012 by raandy
I would agree that taking a step towards ending nuclear power generation is a bold thing.I hope it is only one of many steps before the nuclear switch is thrown.

I would think the prudent direction would be to have an steadfast alternative source of egual output available first.
16:56 February 16, 2012 by derExDeutsche
Also,

In 1999, Gray Davis was in Greece in on Behalf of Enron selling the Greeks their 'Greek Wind Project'. Things are coming into focus.
16:57 February 16, 2012 by Englishted
They would have pushed it further I'm sure if more money could have been made.

Hypothermia caused by the big C .
17:27 February 16, 2012 by amaticc
I do not see where is a problem.

Take out all profit plus 20% of bruto income of a company. Plus cancel all payments for share holders and all bonuses for all executives for next 5 years. Where is the problem? In case of a black out during emergency time (to cold) just sent all executives in a jail.
17:30 February 16, 2012 by finanzdoktor
I cannot wonder about something, since the subject of renewables came up in the discussion: How much of the renewables were inoperative due to the cold, harsh weather? If not, then were they all operational? If not, then why weren't they "fired-up" to help with the increased demand? And, if they were inoperative, how will that be a solution next time?
17:50 February 16, 2012 by neunElf
The problem is not any conspiracy by traders, instead it is the hysterical governments reaction to Fukushima that is placing Germany's energy supply at risk!

Focus on the disease, not the symptoms!
18:07 February 16, 2012 by derExDeutsche
@ neunElf

The disease is thinking that there will EVER be fair energy cost. Supply be damned, demand be damned. with Robber Barons called Politicians and their crony capitalism around, there will always be a reason to keep the price sky high, and the money flowing in 1 direction. It doesn't matter if Germany's landscape from Hamburg to Munich is Wind and Solar farms. Its still won't be enough. After all, those are now public sector jobs. And they will need Representation in the Government. Hey, while we're at it, lets make them jobs for Immigrants.
18:43 February 16, 2012 by DOZ
Green Energy will not happen over night. Like the PC, it takes time to take a foothold. Now look where you are.

Green Energy is the next economic boom of the world, now that the PC Boom has petered out. Without Green Energy there is nothing to advance technology at the rate to keep Depression away.

Return to Kyoto. Nuke Energy is a bottomless pit, green energy is not.
18:50 February 16, 2012 by carlm
When all else fails, blame the speculator. That's one of the top plays in the kommie handbook of how to kill capitalism in order for government to take over. Here in the US, anytime energy prices spike, the loons in congress commission an investigation/dragnet to place the blame on speculators. Shortly thereafter, the investigation dies a quiet death for lack of evidence. Germany, the home of kommunism, plays the game well and will likely have more close calls as they try and regulate/tax all non renewable forms of energy production out of existence.

Like the US under Komrade Odumbo, Germany is fast on it's way to third world status. They get what they deserve.
21:31 February 16, 2012 by wood artist
All those former Enron employees had to end up somewhere. I wouldn't have suspected they'd pick Germany, but I guess they didn't want to live in a third-rate hell-hole, so maybe Germany makes sense.

In the US, according to one industry guy, the price of oil is probably about 40% too high, because bankers, who have no direct interest in the oil business, buy and sell futures to make money...which they make a lot of, and that drives up the price. Gotta love GREED. Next to gluttony, it's probably the best of the seven deadly sins.

wa
00:43 February 17, 2012 by El_Zoido
@Finanzdoktor:

The Renewable sources worked as they should / could.

Solar power even provided up to 10.000 MW of power at noon. => Fractions of that peak-productions from 7am - 5 pm.

Windpower was only at about 1.800 - 7.000 MW around the 6th & 7th February.

I've seen no reports on biomass plants having any problem with the weather... -20°c is not really unusual in Germany.

When reading these kind of news one has to remember that Germany is interconnected with the european powergrid.

The origin of the increased power demand -at the time in question- was mainly France.

Not only did their power demand surge to new records, there were also problems with several conventional power plants.

- A coal plant had to reduce production due to lack of fuel (coal)

- A nuclear reactor in Cattenom, France went into an unscheduelled shutdown due to troubles

The artificially high demand created the increased prices and troubles in France also lead to spikes in prices across the border here in Germany.

Overall the prices were however 180-650% higher in France, compared to Germany during the cold weeks in early February.

So the root cause of the situation was not a lack of available power capacity here in Germany...

At the center of the issue was the fact that traders gave false estimates of power demand => not requesting enough available power capacity.

It was simple and basic greed / speculation.

Traders didn't want to pay market prices, changed their estimates and were happy to pay for emergency reserve power kicking in and supplying the "unpredictable" shortage.

Sure there was a regulatory loophole (emergency reserve power not being pegged to market prices +50%), but the regional traders have violated their legal obligations by giving false estimates.

I hope they'll be fined / prosecuted for their selfish & organized violation of rules.
14:14 February 17, 2012 by finanzdoktor
@El_Zoldo: Thank you very much for the explanation and answering my question(s). It cleared a lot up for me, as I do not reside in Europe. Also, please forgive me, but you mentioned the increased demand came mostly from France due to not only the extremely cold weather in Europe, but also because a coal-fired plant there did not have enough fuel and a nuclear plant had unscheduled maintenance issues.

Given that utilities can only obtained the return on investment and/or profits at some set limit between them and the regulators, no wonder they wanted to pay lower prices. Now, if there was some collusion or other nefarious events taking place, then I could better understand most people being upset.
14:34 February 17, 2012 by El_Zoido
@Finanzdoktor:

Your welcome. Unfortunatly news on matters of energy are often prone to give a very limited view of events. Not only is it a highly political matter, it's also a complicated system with many special interessts pushing their agenda into the media.

Well, the behaviour of traders is understandable from a profit making perspective, but there wouldn't be an investigation if what they were doing was legal.

The traders that bare the main responsibility also have a legal obligation to put grid stability above profits. Those traders are called something like "regional balance traders" and they are responsible to estimate the power demand for any given time.

When they "order" too much, they can rebate it... if they order not enough, the emergency reserve capacity kicks in and they have to pay for it afterwards.

The following link shows the price for electricity in France for the last 30 days.

The nuclear power plant failed in the early hours of 10th February.

When you change the graph from "France" => "PHELIX" you can see the German market prices at the same time. It was significantly lower, but follows the same pattern.

http://www.eex.com/en/Market%20Data/Trading%20Data/Power/Hour%20Contracts%20|%20Spot%20Hourly%20Auction/Hour%20Contracts%20Chart%20|%20Spot%20Hourly%20Auction/spot-hours-chart/2012-02-18/FRANCE/-/1m
05:22 February 19, 2012 by rwk
Ending nuclear in Germany is bold, if cutting your nose off to spite your face is bold. Germany will suffer major catastrophes when there is no more nuclear power in the country. That is, unless they can maintain cordial relationships with Poland, France, Belgium, and Czechia.

Vote for responsible energy policy. Vote out The Green Party! Oh, wait, Merkel isn't a Green...never mind....vote for the Thorium Party!
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