European electricity markets: year-average prices much higher than in 2007. The development of prices for fuel and emissions certificates had a big effect on Europe‘s wholesale electricity markets. In spot trading on the European Energy Exchange (EEX) in Leipzig, Germany, baseload contracts were concluded at an average of €66 per megawatt hour (MWh) in 2008. This was much more than in 2007 (€38). Glossary electricity rose in price from €56 to €88. Among other things, the quotations reflected the significant difference in the cost of emissions certificates for 2007 versus 2008. Prices in German electricity Glossary were up year on year as well, albeit not as much as on the spot market. In 2008, contracts for the coming calendar year (2009 forwards) sold for an average of €70 per MWh for Glossary power and €99 per MWh for peak-load power. In comparison, the 2008 forwards cost €56 and €79 on average, respectively, in 2007. Forward prices were influenced above all by the development of hard coal and gas prices. This explains why there were differences between the first and the second half of the year: The price of the 2009 base-load forward rose from €62 per MWh at the beginning of the year, to a record of €90 (July 1), before falling back to €56 by the end of 2008.
Development of wholesale electricity spot prices in Germany in €/MWh
Development of one year forward wholesale electricity prices in Germany in €/MWh
We sell forward nearly all our in-house electricity generation output in order to reduce volumes and price risks. Therefore, electricity prices witnessed in the period under review only had a minor impact on our income in 2008. What was much more decisive was the price at which we concluded contracts for delivery in 2008 in preceding years. Our sales of 2008 generation fetched an average price of €58 per MWh in Germany. This was substantially more than the comparable figure a year earlier. We had sold our production for 2007 at an average of €47 per MWh.
The rise in electricity prices also had a positive effect on our earnings. This applies primarily to our lignite and nuclear power plants, since the general rise in Glossary prices did not add to costs substantially: We produce lignite ourselves, and fuel costs account for a relatively small portion of total costs in nuclear power generation. Our hard coal and gas power stations face a different situation. Their earnings development is predominantly influenced by so-called clean dark spreads (hard coal) and clean spark spreads (gas). These are calculated by deducting the costs for the respective fuel and CO2 certificates from the market price of electricity. Overall, the situation on the German market was less favourable for our hard coal power plants, whereas for our gas power stations, it was better than in 2007.
The trend in electricity prices for end customers and distributors in Germany reflects the rising prices on the wholesale market. Most of the power utilities had to lift tariffs due to the increase in electricity procurement costs. In 2008, prices paid by households and small commercial operations were up an average of 5 % year on year. Industrial enterprises had to pay around 13 % more. For deliveries to this customer group, the share of electricity procurement costs in the total price is especially high.