The Federal Ministry of Economic Affairs has today published its Green Paper on the future development of the German electricity market. It looks into two basic approaches: an optimised electricity market (“electricity market 2.0”) or a further market alongside the electricity market to maintain reserve capacity (“capacity market”). Comments on the Green Paper are due by 1 March 2015.
The Green Paper “An Electricity Market for the Energiewende” (Ein Strommarkt für die Energiewende) on about 50 pages looks into developing a future market design and regulatory framework for electricity. Starting from the – obviously correct – observation that the electricity market is currently in a transition phase, it addresses the growing role of renewables, the decreasing use of nuclear power and the more and more connected European power markets.
To balance power generation and consumption, any future electricity market has to fulfil two tasks:
- It must ensure that sufficient capacity is available (i.e. the maintaining of reserve capacity), and
- This capacity is used at the right time and to the extent necessary (i.e. appropriate use of capacity).
On the substance, the Green Paper examines two basic approaches for the long-term development of the electricity market:
“Do we want an optimised electricity market (electricity market 2.0) with a credible legal framework that investors can rely on and which allows electricity consumers to independently determine through their demand how much capacity is maintained – or do we want to set up a further market alongside the electricity market for the maintaining of reserve capacity (capacity market)?”
In its analysis, the paper draws on several studies previously commissioned by the Ministry, concluding that ultimately acceptance of price peaks in wholesale market is decisive. The key question is whether occasional price peaks in the power market will be accepted. Both basic approaches can ensure security of supply. With capacity markets or reserves, a higher capacity level can be maintained than would otherwise result from the power market. Capacity markets can reduce price peaks on the spot market. However, this would create an additional cost element that would have to be borne by consumers through a capacity surcharge.
In each case, the uncertainties of the transition period should be addressed by maintaining a capacity reserve (which is different from a capacity market) as an additional safeguard.
The Federal Ministry for Economic Affairs and Energy has asked for comment to the Green Paper to be submitted by 1 March 2015.
After assessment of the comments to the Green Paper, the Ministry will present a White Paper with specific proposals at the end of May 2015. The White Paper will also be publicly consulted until September 2015. The next step will the be the drafting of the necessary legislation.
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- Advisory Committee to Economics Ministry in Favour of Capacity Market in the Long-term
- Federation of German Consumer Associations sees no Need for Capacity Market
- FAZ/EWI Energy Conference: Oettinger on Harmonsation of Renewable Support, EEG Surcharge, Loop Flows, Capacity Markets