Germany is a net exporter of electricity, even to France

Germany is a net exporter of electricity, even to France

Romain Zissler, Researcher, Renewable Energy Institute

in Japanese

Understanding the difference between commercial and physical flows of electricity is critical to get the picture right about electricity trade in Europe.

2017 was another record year for Germany’s commercial net exports of electricity to neighboring countries; +60.2 terawatt-hours (TWh) (Map).

The map above notably shows that Germany exported 13.7 TWh more to France than it imported.
That is because electricity prices were lower in Germany than they were in France (Chart 1).

These low prices in Germany are the result of the significant deployment of close to zero marginal costs wind and solar power in the country since the acceleration of the Energiewende (Chart 2).

So, why are there still people believing that Germany relies on France to power its energy transition?
The probable answer is because of a confusion between commercial and physical flows of electricity.

For instance, representations of physical flows of electricity – such as the one below in Japan Ministry of Economy, Trade and Industry (METI)’s latest Energy White Paper 2017 – show Germany as a major electricity importer from nuclear powerhouse France. Yet we have seen this is not the case on a commercial basis.

The chart above indicates that in 2014 France exported 14,786 gigawatt-hours (GWh) of electricity to Germany, and imported only 824 GWh from Germany. This presentation is both correct and misleading. Indeed, the information reported here is incomplete and therefore fails to properly describe electricity trade relationships between the two neighbors.

A rigorous presentation of such data requires a note explaining how the International Energy Agency (IEA) estimates electricity imports & exports in its report Electricity Information 2016. The IEA considers electricity imports & exports amounts when they have crossed the national territorial boundaries of a country. It very importantly adds “If electricity is “wheeled” or transited through a country, the amount is shown as both an import and an export.”

This means that consumers in Belgium, Italy or Switzerland may be the contractual buyers of electricity from France, but that if the physical flow of electricity goes from France where electricity is generated, carried over German power lines, and then reaches another country where it will be further transported or finally consumed, consequently the IEA considers Germany as the (1) importer of electricity from France and (2) exporter of this electricity to another transporting country or to the country the demand for French nuclear power initially originated from.

Providing the transmission service does not effect the electricity balance of the country providing transmission. Power going from country ”one” to country ”two” through country ”three” does not change the power balance of country ”three.”

Thus, the imports & exports figures indicated in METI’s chart do not provide a relevant description of the electricity trade between France and Germany. And, based on these figures, it would not only be presumptuous, but simply wrong to conclude that Germany heavily relies on French nuclear power.

For the sake of exhaustivity and clarity below is the missing piece that would have enhanced METI’s presentation of international electricity trade in Europe:

The figure above shows commercial flows of electricity between France and other countries in 2014. Without surprise Germany was a net exporter of electricity to France in that year because again electricity prices in Germany were lower than those in France; €32.8/MWh against €34.6/MWh for average spot prices on power exchanges (see Chart 1).

Following these explanations and thanks to Chart 1, it is straightforward to conclude that the years 2014 and 2017 were not exceptions. Only in 2011 after the immediate shutdown of seven nuclear power reactors Germany was a net importer of electricity from France (Chart 3).¹

Going further it is possible to advance the following two key findings; France usually benefits from both Germany’s (1) electrical grid infrastructure to export its electricity to its other neighbors and (2) cheaper electricity prices to supply its consumers.

One may wonder why physical flows do not follow commercial flows. The difference between physical and commercial flows lies in the laws of physics. Physical electricity flows follow the path of least resistance not commercial flows scheduled destinations. Power plants generate electricity according to the amount of electricity that has been commercially agreed. Grid operators have to transport this electricity to the load centers. If the electricity cannot flow through because of grid bottlenecks, most of it will take the path of least resistance. This, generally, means through the power grids of the neighboring countries.²

Finally, it may be added that imports and exports of electricity may serve different purposes. For example, by providing flexibility to the electric power system it can be a tool to integrate variable renewables. Or under severe conditions it can also be a solution to meet high electricity demand at lower costs. For instance, at the time of writing France was importing 10,646 megawatts from neighboring countries, out of which 4,985 megawatts from Germany at less than half the price in France; €54.0/MWh in Germany against €120.1/MWh in France, to help meeting high electricity consumption due to freezing weather.³

These explanations were written with the hope that it would benefit the energy debate in Japan. A comprehensive and relevant analysis of this often misunderstood issue being of critical importance to Japan’s political and industrial decision makers facing important decisions with long-term economic implications for the country.