BMWI Presents White Paper on Future Electricity Market – Capacity Reserve But No Capacity Market

On Friday the Federal Ministry for Economic Affairs and Energy (BMWi) presented the much awaited White Paper which outlines the ministries plans for a future electricity market (Strommarkt 2.0). The White Paper proposes a capacity reserve system and not a capacity market to balance the security of supply in Germany where intermittent renewables shall provide energy for the most part by 2050.

1. White Paper

In view of the challenge to secure the German electricity supply presented by a growing amount of intermittent renewable energy that is supported under the Renewable Energy Sources Act (EEG), the government presented a Green Paper in October 2014. It looked into two basic approaches: an optimised electricity market (“electricity market 2.0″) and a further market alongside the electricity market to maintain reserve capacity (“capacity market”). Some 700 comments were made by stakeholders.

Based on the consultation BMWi drafted the White Paper which contains key points for 20 measures BMWI proposes for the Strommarkt 2.0. The measures form part of the three so-called building blocks of the new strategy (see page 59 of the White Paper) the White Paper sets out.

  1. “More Market”: Four proposals listed are intended to strengthen market mechanisms. Capacity needed can thus be refinanced and the security of supply maintained, BMWi says. The most important proposal in this area seems that the principle of the free formation of prices shall be laid down in the German Energy Act (EnWG). “Prices send important information to market participants. They indicate the scarcity of electricity at a given point in time”, BMWI points out. To what extent this will affect renewable energy sources that are supported under the EEG is still unclear. Please note that as of 2017 Germany wants to establish auctions for the support of all renewable energy sources.
  2. “Flexible and Efficient Energy Supply”: This so-called building block consists of thirteen measures. BMWi highlights that the markets for operating reserve shall be opened in a way that more   providers can offer energy.
  3. “Additional Safeguards”: Under this heading three measures intended to maintain security of supply are listed

– A monitoring of the security of supply;

– A capacity reserve that will include the recently announced 2.7 GW capacity reserve from lignite plants;

– Amendments to the grid reserve.

“The Strommarkt 2.0 ensures the security of supply, is less expensive than a capacity market, provides incentives for innovation and allows to integrate renewable energy sources. Besides, it fits in with the European Single Market”, State Secretary to the Energy Ministry Rainer Baake commented. His words will be tested by the actual implementation.

2. Next Steps

BMWi wants to discuss the White Paper with stakeholders immediately after the summer break in the context of the dialogue forum “Plattform Strommarkt“. Comments can be submitted until 24 August 2015 to “”.

Following the consultation of the White Paper a bill on a new electricity market law will be drafted. Government shall decide on the bill in October 2015. The legislative process shall be completed by spring 2016. The BMWi webpages provide more information on the White Paper and the comments on the Green Paper that preceded the White Paper.

Source: Federal Ministry for Economic Affairs and Energy

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