Statkraft: Presently No Need for Capacity Markets in Germany

The Norwegian electricity producer and wholesale trader Statkraft joined the chorus of those rejecting the idea of capacity markets that surfaced in the wake of Germany’s energy turnaround following the Japanese nuclear accident in Fukushima and the immediate shut down of several nuclear power plants.

Capacity markets, especially for operating reserve, have been suggested to encourage investment in flexible power plants that can quickly react to the demands for additional or reduced output.

Statkraft presently sees no need to intervene in the German wholesale market (which it calls the best functioning power market in Europe) by creating capacity markets or stimulating investment with direct subsidies. On the contrary, capacity mechanisms might easily distort the market, the company warns. It suggests to remove still existing, smaller barriers instead.

In this regard, Statkraft inter alia proposes to come to a more market based support scheme for renewables to allow for a more market based dispatch and reduction of generation in case of oversupply and security problems. Besides, there was still overcapacity in Germany and hidden reserves on the demand side, Statkraft says.

It understands that the sudden shutdown of 5,000 MW in nuclear capacity changed the regional load management to such a degree that it can cause severe and acute challenges for transmission system operators to maintain a secure system, the company says. However, these challenges needed to be addressed on the network side.

Statkraft proposes a regular market monitoring to assess whether the market design still sufficiently supports the reliability requirements or whether a change of the market design (possibly including capacity markets, capacity payments and enhanced reserve products) will be needed in the future. This should be done on a European level so as to avoid market distortions, Statkraft demands.

The concerns expressed in its position paper also applied to investments in storage Statkraft points out, while underlining that the existing Norwegian hydro storage capacity could provide enormous flexibility for the German market if new cables between Norway and Germany respectively the continent were built.

Source: Statkraft

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