Government Passes Ordinance on Reserve Power Plants to Ensure Security of Supply

Yesterday the government passed the Reservekraftwerksverordnung (Ordinance on Reserve Power Plants), which further specifies the provisions introduced to the German Energy Act (EnWG) in late 2012 concerning the security of supply (Sections 13a to 13c and Section 13 paras. 1a and 1b EnWG).

The ordinance lays down rules for procuring reserve capacity from existing power plants generating or storing electricity for the secure and reliable operation of the energy supplies system. As Section 1 para. 1 sent. 1 points out, in exceptional cases this can include the procurement from power plants to be built for that purpose. The ordinance provides for an annual review of the security of supply and the power plants available, both by the transmission system operators and the Federal Network Agency. Should they establish a need for additional reserve power, the transmission system operator responsible for the area will publish the technical requirements and conclude contracts with interested parties, who are remunerated in accordance with the ordinance. Besides, the analysis of the available reserve power capacities shall examine the need for new (conventional) power plants. Should the Federal Network Agency see such a need, because all other options are exhausted, the responsible TSO is entitled and within its capabilities obliged to procure new reserve power plants, by issuing an invitation for tender (cf. Section 8 paras. 2 and 3).

Furthermore the ordinance further specifies the rules regarding closure of power plants. A shutdown has to be notified in case of plants with a capacity of more than 10 MW and can in certain limited cases even be prohibited.

As the Federal Ministry of Economics and Technology points out, the ordinance shall expire 2017, and represents a temporary regulation until a decision about amendments of the regulatory framework for energy, including the Renewable Energy Sources Act (EEG), will be made.

Since under the EEG renewable energy has to be purchased and transmitted by the grid operators, the growing amount of fluctuating renewable energy has rendered many conventional power plants economically unattractive. At the same time they are much needed to balance the grids. Hence a discussion about incentives for conventional power plants has been going on in Germany for some time.

The Federal Association of the Energy and Water Industry (BDEW) had proposed its own so-called strategic reserve model, a reversed auction. It called the new ordinance not market-oriented enough and said it hoped for an amendment after the Federal Election in September. The Federal Association of New Energy Suppliers (bne) on the other hand considers the BDEW proposal as not market-oriented. It welcomed the new ordinance as an interim solution, but called for “competitive capacity mechanisms”.

Source: Federal Ministry of Economics and Technology; BDEW, bne

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