High electricity price despite expansion in renewables: How market trends shape Germany’s power market in the coming years

Mario Liebensteiner, Fabian Ocker and Anas Abuzayed

Energy Policy, 2025, vol. 198, issue C

Abstract: Expectations about future energy prices are crucial for investment decisions, market reform debates, and public policy. Yet, the recent energy crisis caused dramatic market uncertainty. This study investigates Germany’s near-future wholesale electricity price in the context of evolving market trends. A flexible econometric model is applied to high-frequency, near-time data, spanning January 2015 through May 2023. A potential endogeneity bias of trade is circumvented by an instrumental-variables approach. Results indicate that expanding renewable energy exerts downward pressure on price, countering trends like the nuclear phaseout, a rising carbon price, increased electrification, and a high gas price. The collective impact suggests a considerably higher electricity price in the coming years compared to pre-crisis levels. This finding is corroborated by a fundamental energy system model. The potential rise in renewables’ production volatility may amplify electricity price volatility. A high and volatile near-future electricity price could spur investments in renewables and flexibility technologies but pose challenges for consumers. Our analysis aids evidence-based decision-making amid the post-crisis landscape.

Keywords: Electricity price; Market trends; Price prediction; Renewable energy (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:enepol:v:198:y:2025:i:c:s0301421524004683

DOI: 10.1016/j.enpol.2024.114448

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