Following the disruptions in fuel and gas prices, the energy crisis is now hitting the electricity market with full force. In Germany, electricity contracts for the coming May were traded at €86.80 per megawatt-hour on the EEX power exchange on March 31. In France, the comparable price at the same time was only €22.06. This means that electricity for May costs almost four times as much in Germany as in its neighboring country. The trigger is the escalation of the situation in the Middle East, with consequences for gas supplies. However, this is hitting a German electricity system that, since the nuclear phase-out in 2023, is significantly more vulnerable to expensive fossil fuel generation. Costs rise sharply, especially during periods of low wind and sunshine. The consequences therefore range from increased pressure on energy suppliers and industry to new burdens for households. (bloomberg: 31.03.26)
Germany’s electricity market is falling deeper into a cost trap
The extreme price gap between Germany and France didn’t come out of nowhere. It has built up over years, but the new crisis is exposing it with unusual force. France relies primarily on nuclear power for its electricity supply, supplemented by renewable sources. This creates a comparatively stable and inexpensive production base.
Germany, however, is pursuing a different course. Wind and solar power now supply large quantities, but since the shutdown of the last nuclear power plants, there has been a lack of a stable backup for periods of low demand. When renewable energy feed-in drops in the evening, gas and coal-fired power plants have to fill the gap. It is precisely during these hours that the rising cost of fossil fuels directly impacts electricity prices.
The war exacerbates an existing disadvantage
The market is thus not merely reacting to a short-term event. Rather, the war surrounding Iran is exacerbating a structural disadvantage that was already inherent in the German electricity system. Yiannis Papamikrouleas, Head of Trading at DEPA Commercial SA, succinctly summarizes this development: “The trend was already there. The current geopolitical premium is accelerating and intensifying it.”
This assessment explains the sharpness of the fluctuation. Geopolitical uncertainty is driving up gas prices, while Germany remains more dependent on flexible fossil fuel power plants than France. Therefore, the price here is not simply rising in tandem, but significantly faster. The electricity exchange is thus assessing not only the current situation, but also the growing vulnerability of the German system.
While energy suppliers are trying to mitigate the burden, partially shifting generation from imported gas back to coal, this approach is also losing its effectiveness. Too many coal-fired power plants have already been shut down as part of the phase-out process, leaving limited room for maneuver.
Berlin is considering bringing back old power plant reserves
This is precisely why a step that seemed politically moot is now coming to the forefront. The German government is considering bringing coal-fired power plants back from reserve to the market. Furthermore, the reactivation of decommissioned units is even under discussion. This demonstrates how seriously the situation is now being assessed.
Additional pressure is also being exerted by the French export market. According to William Peck, senior European analyst at Energy Aspects Ltd., the French grid operator RTE has restricted cross-border electricity flows in the east during previous spring periods due to grid bottlenecks. Such restrictions drive down prices in France because surpluses remain within the country. In neighboring countries, however, costs rise because cheap imported electricity is lacking. The record price difference in May’s electricity prices is therefore more than just a stock market reading. It marks a new escalation of the European energy crisis.