On 12 December 2024 Germany ran short of wind and sun at the same time as cold weather lifted demand. In the early hours a megawatt-hour in the German day-ahead market cost about EUR 107. By the evening peak, according to data compiled by Agora Energiewende and reported by Deutsche Welle, it had risen to EUR 936. The next day prices fell back to a low of just under EUR 115. The episode, the second notable Dunkelflaute of the winter after a similar spell in early November, sent prices sharply higher in neighbouring markets coupled to Germany, including southern Norway and southern Sweden.
The reaction in Scandinavia was fierce. Norway's energy minister, Terje Aasland, was reported to be considering cutting interconnector links to Denmark, and there were calls in Norway to renegotiate connections to Germany and the United Kingdom. Sweden's energy minister, Ebba Busch, said she would only consider a new cable to Germany if Germany changed its electricity market to protect Swedish consumers. Our view is that the anger is understandable but the proposed remedy is wrong. The episode exposes a shortage of flexible capacity and of demand response in Germany and across the coupled region. Reducing interconnection would make every country more exposed to its own weather, not less.
What happened in the market
A Dunkelflaute, literally a dark doldrum, is a period of low wind and low solar output, typically in winter under a stable high-pressure system. In a system with a high share of wind and solar, those periods require other sources to fill the gap. Germany relies on gas and coal plants, imports and, to a lesser extent, demand reduction. As DW noted, German coal and gas plants ran at high levels during this winter's low-renewable spells.
When domestic supply is tight, prices rise until enough capacity, including imports, is called on to meet demand. Because Europe's markets are coupled, flows go from lower-priced to higher-priced zones until interconnector capacity is exhausted. Southern Norway and southern Sweden, which are connected to Germany and to markets linked to it, export power and see their own prices rise towards the German level. For Nordic consumers used to cheap hydro and nuclear power, that is a shock. The price they see is set, at least in part, by a German shortfall.
The scale of cross-border trade is substantial. Mathias Mier of the ifo Institute told DW that almost one in every seven units of electricity in Europe is traded across borders. The economist also made the more important point: such episodes matter a great deal for short-term prices, but much less for annual averages.
Why the backlash is misdirected
Interconnection works in both directions. Norway and Sweden export when Germany is short, and import when their own hydro reservoirs are low or nuclear plants are offline, or when Germany has a surplus of wind and solar. Over the course of a year, interconnection lowers average costs and improves security for all participants, because it allows each country to draw on a wider pool of resources. The Nordic countries have earned substantial export revenue and congestion income from their links.
Cutting or limiting interconnectors to insulate domestic prices would mean that Nordic producers lose access to high-priced export markets, Germany loses a source of flexible supply, and everyone becomes more dependent on domestic resources during their own stress periods. It would also undermine the integrated EU market that the Nordic countries have championed for decades. As DW put it, calls for electricity nationalism conflict directly with the goal of an integrated market.
That said, the political problem in the exporting countries is real. When households see their bills rise because of conditions in another country, the case for integration has to be made in terms of benefits they can see. The distribution of gains, with producers and grid owners earning more while consumers pay more, is not automatically fair, and governments may reasonably use congestion income or other tools to cushion consumers.
Who should pay for the spike
There is also a question of how the price signal is shared within Germany. Most German households are on long-term fixed contracts, as DW noted, so they barely felt the 12 December spike. Industrial users on day-ahead or intraday prices felt it fully, and so did Nordic consumers on variable tariffs, which are common in Norway and Sweden. The result is that the consumers least responsible for the shortfall and least able to hedge carried a large share of the immediate cost. A sensible response is to encourage hedging and fixed-price offers in the exporting countries, and to reward flexibility in the importing one, rather than to restrict the flows that make the whole system cheaper on average.
The real lesson: flexibility
The episode shows that Germany and the wider region need more flexibility for low-renewable periods. That means several things. First, firm dispatchable capacity, including gas plants that can later run on hydrogen or be retired as other options mature. Germany's plans for new gas-fired capacity have been delayed by political argument and by the need for state-aid approval. That delay is costly.
Second, demand response. Industrial consumers that can reduce load during price spikes provide capacity at very low cost. DW reported that some energy-intensive industries slowed or stopped production during recent intraday spikes. That is the market working, but much of the response remains unplanned and unrewarded. Structured demand-response programmes would make it reliable and fairly compensated.
Third, storage. Batteries help with daily cycles but cannot bridge multi-day Dunkelflaute periods alone. Longer-duration storage, pumped hydro and, in the Nordic case, flexible use of hydro reservoirs are the tools that can. This is where interconnection with Norway is most valuable: Norwegian reservoirs are among the largest flexible resources in Europe.
Our assessment
The 12 December price spike was a short, sharp signal that the European system is short of flexibility in the hours when wind and sun are both absent. It was not evidence that interconnection is harmful. The Nordic backlash should be met with a fair discussion about how the benefits of trade are shared, and with faster investment in flexible capacity, demand response and storage in Germany. Reducing interconnection would raise costs and lower security for everyone, including the countries that are now most angry.