Has Electricity Decoupled From Gas Yet? (Germany)

What does “decoupled” mean? In a gas-dominated electricity market, the marginal generator setting the price is almost always a gas-fired power plant (CCGT). That means electricity prices are structurally linked to gas prices — when gas rises, electricity rises with it. Decoupling happens when enough zero-marginal-cost renewable generation (wind, solar) pushes gas off the margin for enough hours that the annual average electricity price no longer tracks gas.

Implied electricity price = TTF gas × 1.8 + CO₂ price × 0.35

The formula: A modern combined-cycle gas turbine (CCGT) at ~55% efficiency consumes 1.8 MWh of gas to produce 1 MWh of electricity, and emits approximately 0.35 tonnes of CO₂ per MWh output. The operator must purchase EU ETS allowances for those emissions. This gives the short-run marginal cost of a gas plant — the floor below which gas generators won’t bid into the day-ahead market.

Decoupling threshold: We flag a year as “decoupled” when actual electricity prices trade more than 20% below the gas-implied level. The verdict flips to YES when either the current or most recent completed year clears that threshold. The 20% gap accounts for the fact that gas doesn’t need to disappear entirely — it just needs to set the price less often.

Data sources: Electricity prices from Fraunhofer ISE energy-charts.info (EPEX Spot day-ahead auction, DE-LU bidding zone, volume-weighted annual average). TTF gas annual averages from ICE/IEA. EU ETS CO₂ from EEX auction settlement data.

Limitations: Electricity prices are volume-weighted by traded volume at auction — hours with higher trading volume (typically low-price hours) carry more weight. TTF and CO₂ annual averages are calendar-year front-month approximations.