Analysis: Tracking the Decoupling of German Electricity Prices from Natural Gas
By
konschubert
1mo ago· 2 min readenInsight
65/100
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Lightly browned and well buttered. A solid pick from the rack.
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Summary
This article examines whether German electricity prices have decoupled from natural gas prices, explaining that decoupling occurs when renewable energy sources with zero marginal costs (wind, solar) displace gas-fired power plants from setting the marginal price in electricity markets. The analysis uses EPEX day-ahead auction data and TTF gas benchmarks to track this relationship, noting that historically electricity prices have been structurally linked to gas prices because gas plants typically set the marginal price.
Key quotes
· 3 pulledIn a gas-dominated electricity market, the marginal generator setting the price is almost always a gas-fired power plant (CCGT). That means electricity prices are structurally linked to gas prices — when gas rises, electricity rises with it.
Decoupling happens when enough zero-marginal-cost renewable generation (wind, solar) pushes gas off the margin for enough hours that the annual average electricity price no longer tracks gas.
Implied electricity price = TTF gas × 1.8 + CO₂ price × 0.35
Tracking whether German electricity prices have decoupled from gas prices, based on EPEX day-ahead auction data and TTF gas benchmarks.
