Merit Order: Why Gas Shapes Power Prices for Real Estate Portfolios
According to Next Kraftwerke, July 2026 recorded the highest renewable share of German power generation in the year to that point. Meanwhile, power for delivery in 2027 became more expensive. The merit order helps explain this relationship. Real estate portfolios need to assess consumption profiles, gas prices and procurement strategy together.
How the merit order forms the power price
The merit order is a simplified ranking of generation offers by short-run marginal cost. Wind and solar typically come first because they have no fuel costs. If their output is insufficient, further offers are needed. The last offer required to meet demand sets the uniform market price for the delivery interval. A gas-fired plant can set that price, but does not do so in every interval. The coupled day-ahead market has traded in 15-minute intervals since 1 October 2025.
Why high renewable output does not automatically lower forward prices
In July 2026, renewables accounted for 71.5% of German power generation. There were 79 hours with negative day-ahead prices and periods of negative residual load on 22 days. These figures describe the short-term spot market, particularly around midday.
Forward prices reflect expected costs and risks for a future delivery period. The 2027 baseload contract rose from €92.41/MWh at the start of July to an interim high of €111.40/MWh, ending the month at €104.24/MWh: an increase of around 13%. Gas also became more expensive. The graphics show historical market data for July and August 2026.
What this means for real estate portfolios
Properties do not consume electricity only during low-price solar hours. Offices, retail properties, hotels, logistics assets and residential portfolios have different load profiles. Evening consumption, baseload and seasonal peaks may coincide with periods when flexible, higher-cost generation sets the price.
The contract date influences the price level, but a single quotation needs a market benchmark.
Load profile and supply structure determine how spot and forward prices affect an offer.
Offers are comparable only when volumes, contract terms and risk parameters are aligned.
Complete supply-point, contract and consumption data are essential for effective supplier competition.
Assess spot and forward markets separately
For August 2026, the cited data source reports day-ahead daily baseload averages ranging from €75.63/MWh to €176.73/MWh. The highest daily average was approximately 2.3 times the lowest. This describes fluctuations in short-term delivery prices; it does not measure the timing risk of a multi-year fixed-price contract. Assessing a multi-year offer requires the relevant forward product, load profile, volume risks, supplier margins and contractual flexibility.
What a structured procurement process should deliver
Consolidate contract expiry dates, notice periods and supply points early.
Review load curves and consumption volumes at portfolio and property level.
Set price targets, contract terms and fixed-price, index or tranche models before tendering.
Invite several suppliers to quote against a common specification.
Compare offers using a clear price comparison and defined decision criteria.
Document market developments and procurement decisions.
Conclusion: structure beats gut feeling
The merit order helps explain why high renewable output and rising forward prices can occur together. It does not imply a blanket buying recommendation for real estate portfolios. The priority is to be ready to tender and make decisions when suitable offers become available, supported by reliable data, an agreed strategy and supplier competition.
Data basis
The figures refer to July and August 2026 and have been reviewed in that historical context. Wholesale benchmarks are not end-customer prices and do not replace a portfolio-specific procurement assessment.
Sources: Next Kraftwerke – German power market, July 2026 · energieaktuell – energy prices · Agora Energiewende – merit-order perspective
Further reading
2027 energy prices are climbing · Energy market in brief – June 2026 · Green energy: opportunities, limitations and options
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