EWI Merit-Order Tool

The EWI Merit-Order Tool 2025 is an Excel-based tool for determining and graphically representing the merit order (dispatch order) of the conventional German power plant fleet. It approximates the supply curve on the electricity spot market and makes the influence of fuel prices, emission allowances, and power plant additions or decommissionings interactively analyzable. By modifying the power plant list, regulatory frameworks and the merit-order effect of renewable energies (RES) can also be represented.

EWI Merit-Order Tool for Consulting and Research

The Excel-based tool makes the influence of individual parameters on the supply curve on the electricity exchange interactively comprehensible. By varying the influencing factors, both the average merit order for certain periods and the merit order for specific situations can be examined in a low-threshold way. Thanks to its adaptability, the tool is also suitable for more in-depth analyses, for example on the influence of fuel or CO₂ price changes or on the effect of power plant decommissionings and additions.

EWI Merit-Order Tool in Practice:

• Fuel price analysis: examine the influence of price changes for gas or coal on the electricity price level
• CO₂ price analysis: assess the effects of allowance price changes on the power plant order (fuel switch) and electricity prices
• Power plant fleet scenarios: estimate the effect of decommissionings or additions on residual load coverage
• RES feed-in scenarios: simulate the merit order under different feed-in scenarios of renewable energies
• Demand scenarios: analyze the effects of load changes on the resulting electricity prices

EWI Merit-Order Tool in Detail

The merit order is the term used for the dispatch order of the power plants offering on the electricity exchange. It is based on the power plants sorted in ascending order according to marginal costs and thus approximates the actual supply curves, for example of the day-ahead auction on the electricity exchange. The annual average merit order of the German power plant fleet gives a good overview of the marginal cost ratios of the power plants under current conditions and is influenced in particular by the power plant fleet as well as the underlying fuel and emission allowance prices.

The Merit-Order Tool is based on a static optimization approach (bottom-up calculation of the marginal costs) and orders the power plant dispatch sequence according to the estimated marginal costs, thereby simplifying the real price formation under perfect competition. In practice, it supports the forecasting of market price signals, the assessment of the competitiveness of individual power plant types, as well as the analysis of market entry or exit scenarios. Compared to complex electricity market modeling, market and regulatory changes can be examined statically with minimal effort and visualized in a generally comprehensible way, Germany-wide and technology-specific (e.g. the effects of expansion of RES or gas power plants).

The assumed power plant fleet is based on the Marktstammdatenregister (Core Energy Market Data Register) of the Bundesnetzagentur (Federal Network Agency). The individual power plant blocks were assigned to their respective generation technology and, with the help of additional sources, provided with an electrical efficiency. For the average merit order of the conventional power plant fleet, standard assumptions apply for fuel price, emission allowance price, transport costs, other variable costs, non-availabilities, and emission factors.

Schematic Representation of the Model

The tool calculates the variable operating costs according to the following methodology and sets these equal to the marginal costs, where EUA (European Emission Allowances) stands for the price of the emission allowances:

$$GK = \frac{fuel\ price}{power\ plant\ efficiency} + EUA \times \frac{specific\ emission\ factor}{power\ plant\ efficiency} + var.\ operating\ costs$$

The tool serves a static analysis, typically an average year or specific hourly snapshots by varying the RES capacity, for the German electricity market (excluding Luxembourg). An isolated analysis is carried out without explicit representation of transnational trade capacities. Further information on the methodology and application is provided by the accompanying documentation for the respective tool version.