BDEW Presents Proposal for Market-Oriented Energy Reform

The Federal Association of the Energy and Water Industry (BDEW) has presented a proposal for a market-oriented energy market reform, which rests mainly on two main pillars. Firstly, BDEW proposes a fundamental reform of the Renewable Energy Sources Act (EEG). It builds on the existing voluntary market premium paid to power plant owners who sell green electricity directly, making it mandatory for new plants. Secondly, BDEW wants to create a decentralised market for secure capacity on which certificates for secure supply are traded. BDEW emphasizes that the concept was adopted unanimously by all various groups represented by the association.

1. EEG Reform

BDEW speaks out in favour of an EEG reform that introduces a mandatory obligation for new renewable power plants to sell electricity directly. Under the existing support scheme producers of green electricity can chose whether to claim fixed feed-in tariffs for renewable electricity fed into the grids or a market premium for green electricity sold by themselves.

In a first step mandatory direct marketing shall be remunerated by a variable market premium. Besides BDEW wants to switch from renewable subidies that are currently paid for a duration of (generally) twenty years for the individual renewable power plant (cf. Section 21 para. 2 EEG) to a support scheme that is limited with regard to the amount of renewable energy (Befristung im Hinblick auf die Strommenge) so as to eliminate the incentive to feed in energy when there is no demand.

In a second step BDEW wants to introduce a fixed market premium that shall be established in the long-run in a market-oriented procedure, e.g. in an auction, and be based on renewable growth targets, which have been coordinated between the German Federation and the federal states.

Moreover, renewables shall contribute to the functioning of the electricity system. They shall for example be equipped with installations for power control, including remote contol (regarding the existing technical requirements, please see Section 6 EEG). Furthermore, BDEW wants to align the growth of renewables with grid expansion. 

2. Market for Secure Capacity

The second main pillar of the BDEW concept consists of a new market framework for conventional power plants.

With more and more green electricity being fed into the German grids that has priority under the EEG, the profitability of conventional power plants is suffering, though they are needed to balance supply and demand. BDEW wants conventional power plants to be able to market their reserve capacities as well and proposes to introduce a legal framework for a decentralised, market-oriented market for secure capacity on which certificates for secure supply are traded. Electricity suppliers could thus buy secure capacity for their customers despite a growing amount of renewable energy, while conventional power plants as well as storage operators, virtual power plants and non-volatile, controllable renewable power plants could offer reserve capacities. To have time to prepare for the new regulatory framework, BDEW wants to introduce a so-called Strategic Reserve Model, it had already proposed in the past (for more information, please see here) for a transitional period.

Moreover, BDEW proposes changes to the Incentive Regulation Ordinance (ARegV) that sets the conditions for revenue caps for grid operators so as to encourage “intelligent grid expansion”. Besides, grid charges shall be more performance-oriented and saved network charges be limited to controllable power plants.

Regarding a recent reform proposal by the Umbrella Organisation of the German Industry BDI, please see the first blog post below.

Source: BDEW

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