The situation remains uncertain. Russia reduced the gas supply through pipeline Stream 1 by 40% in mid-June due to a delay in maintenance. As a result, gas prices reached new record highs.
Whether the situation will cool down after the maintenance is unclear. The market is on alert, and the government announced a gas emergency plan (read more about how Russia's war on Ukraine affects the energy market in Germany here)
You might be wondering why gas prices are linked to energy prices, especially the price for green energy, as gas is not really considered green (depending on who you ask, of course). The underlying reason is the so-called merit order effect, where the most expensive unit (produced MWh) sets the price for the whole energy market. Generating energy through gas turbines has always been the most expensive option, so raising gas prices directly impacts the energy price across the board (you can read more about the merit-order effect and how prices in the energy market are set here).
But what about our PPAs (Power Purchase Agreements)? Unfortunately, those do not protect from price fluctuations. Purchase prices are mostly negotiated on a monthly basis and also depend on the current market price, even though the cost of units produced always stays the same.
Due to the high energy prices, we also have to adjust our prices to meet the market level. The graph below shows the evaluation of the energy price in 2022 with all its fluctuations and the performance of the Ostrom price in comparison.
Here at Ostrom, transparency is always key, and our price adjustments don’t mean that we’re earning more money, but instead that we’re reflecting the actual market situation.
As always we stay true to our promise — when market prices go down, Ostrom prices go down too.
The only way to ensure you’re getting a good deal in such a turbulent energy market is by signing a flexible contract! Signing a 12-24 month price guarantee now will only lock you in to high prices long after the market has stabilized. You can read more on why price guarantees end up being more expensive than flexible tariffs here.
Here at Ostrom, we work hard to ensure we’re contributing towards the energy transition every day. This is why, since we started in April 2021, we’ve only supplied our customers with 100% green energy—no compromises, just renewables.
The Merit Order describes the Order, of which energy source gets used first – from the cheapest (renewables) to the most expensive (gas). The cheapest source of energy production always feeds in first. However, the Merit Order does not represent a legal law, but an economic law, that attempts to describe how the electricity price on the electricity market comes about.