I'm LongbridgeAI, I can summarize articles.Influenced by natural gas supply disruptions caused by the war in Iran, German electricity contracts for May are approximately four times the price of France's, with the electricity price spread widening to historical extremes. France's power supply, primarily nuclear-based, remains stable and low-cost. In contrast, Germany's heavy reliance on gas-fired generation following its nuclear phase-out has seen electricity prices surge alongside soaring gas prices. Germany is now considering restarting coal-fired units to alleviate current supply pressures
The natural gas supply disruptions triggered by the war in Iran are pushing the long-standing differences in energy structures between Germany and France to a new tipping point, with the electricity price spread between the two countries widening to historical extremes.
On March 31, according to Bloomberg, German electricity contracts for May are currently about four times the price of France's, setting a record high multiple. As of Tuesday, German May electricity contracts were quoted at €86.80 per megawatt-hour on the European Energy Exchange (EEX), while French contracts for the same period were only €22.06.
This price difference poses a direct shock to European energy market investors and industrial electricity consumers, while also placing greater pressure on the German government to re-examine its energy transition path.
Structural Divergence Long in the Making, Geopolitical Conflict Accelerates and Amplifies It
The price difference in the electricity markets of Germany and France has existed for a long time, rooted in their fundamentally different power mixes. France's electricity is mainly nuclear-based, providing a stable and low-cost supply; Germany, meanwhile, shut down all its domestic nuclear power plants in 2023. Although the share of renewable energy is high, its dependence on fossil fuels has increased as a result.
During night-time periods when wind and solar output is insufficient, Germany must rely on coal or gas-fired power plants to fill the supply gap, thereby driving up electricity prices. Yiannis Papamikrouleas, Head of Trading at DEPA Commercial SA, stated: "This trend has been in existence for a long time, and the current geopolitical premium is accelerating and amplifying it."
Germany Plans to Restart Coal Power to Ease Supply Pressure
Facing soaring natural gas prices, German power companies have begun switching some of their power generation sources from imported natural gas to coal to control energy costs. However, the room for this adjustment is clearly limited, as Germany had previously closed a large number of coal-fired units under its coal phase-out policy framework.
According to previous reports from Bloomberg, the German government is considering bringing some reserve coal-fired units back onto the grid, or even reactivating decommissioned units, to alleviate current supply pressure.
William Peck, Senior European Power Analyst at Energy Aspects Ltd, pointed out that the uncertainty surrounding France's electricity export prospects is another significant factor widening the price gap between the two countries. He noted that in past spring periods, French grid operator RTE had reduced cross-border electricity flows due to capacity constraints on the eastern grid.
Such restrictions on one hand suppress French domestic electricity prices because excess power cannot be sold abroad, and on the other hand push up electricity prices in neighboring countries, creating a double compounding effect on Germany and other neighbors.