The challenge of electricity prices – An interview with Areva Managing Director Dirk Mithöfer
Electricity prices have skyrocketed recently. What are the reasons for this and when can the trend reverse?
One reason is the CO2 prices for electricity generation. Since 2020, the price of CO2 certificates freely traded in European emissions trading has more than quintupled. Added to this are the historic high prices for gas caused by the long winter of 2020/21, low gas storage levels in Germany and strong global demand. We need gas-fired power plants to fully cover our electricity needs, and these fossil fuel reactors currently determine the price setting on the electricity market, even if renewable energies account for a significant proportion of electricity generation.
Unfortunately, I don’t see the high electricity prices as a short-term phenomenon, they will probably last more in the medium term. This assumption is supported by the fact that at the end of 2022 the last of the comparatively cheap electricity-generating nuclear power plants will be taken off the grid and at the same time the phase-out of coal-fired power generation has been brought forward by politicians.
What are the challenges facing companies with many locations and high power consumption?
Increasing energy efficiency and integrating self-sufficiency is the motto! My urgent advice is that companies invest more in energy efficiency measures and at the same time increase their degree of self-sufficiency in the power supply. They have to increase their self-sufficiency rate, i.e. the percentage of electricity they purchase from their own generation. Photovoltaic systems for self-consumption are a proven method. So-called power purchase agreements, long-term electricity contracts between electricity producers on the one hand and electricity consumers or electricity traders on the other hand, also serve to diversify risk. These PPAs are often linked to a specific wind or solar farm from which the generated energy must come. Companies participate in the energy transition with a PPA, secure parts of their supply in the long term and protect themselves proportionately against price increases.
What advantages can Areva offer customers in this situation?
Areva is exactly the right partner for customers for all topics relating to the energy transition, because we are much more than an energy supplier. We operate renewable energy systems ourselves, integrate PPAs into our customers’ electricity procurement process, are familiar with risk management in energy trading and are very familiar with energy procurement structuring, balancing group management and detailed energy market analyses. At Areva, customers also benefit from extensive know-how in the areas of energy efficiency consulting, energy data management and metering point operation. A current example is the newly developed platform “Areva-ONE”. With this, site managers can, for example, promptly call up the processed energy consumption data of their branch based on our meter operation. This enables a much more targeted approach to efficiency measures than going through the company headquarters.
What does the current market situation mean for Areva?
The business is becoming more and more demanding and our role goes well beyond that of an electricity broker. The task today is to handle the construct of the various sources of energy production and procurement for the end customer in a separate “ecosystem”. Areva manages this because we are deep in the value chain of the energy market processes and have a very high level of IT understanding in this special market. In order to be well prepared for the challenges of the future, we will invest sustainably in this value chain in 2022 and work in particular on the scalability of the integration of our own generation plants.