Juli 2015
Germany: New electricity market design ahead
Ministry publishes White Paper “An electricity market
for the energy transition”
Content
In the first week of July, the German government took an important step
towards tackling the challenge of how to guarantee a secure, low-cost and
environmentally compatible electricity supply when a large share of the power
is derived from renewable energy sources.
On 1 July 2015 the party leaders of the government coalition of CDU, CSU
and SPD met to decide on some of the most important issues regarding the
German energy transition. Two days later the Federal Ministry for Economic
Affairs and Energy (Bundesministerium für Wirtschaft und Energie – BMWi)
published its holistic concept detailing how the German electricity market
should be reformed.
White Paper “An electricity market for the energy transition”
White Paper “An electricity
market for the energy
transition” .......................... 1
Component 1: “Stronger
market mechanisms” ........ 2
Component 2: “Flexible and
efficient electricity supply” . 2
Component 3: “Additional
backup” ............................. 3
Key terms for successful
energy transition
implementation ................. 4
On 3 July 2015, the BMWi published its White Paper “An electricity market for
the energy transition” (“Ein Strommarkt für die Energiewende”), setting the
course for the future organisation of the German electricity market system.
The fundamental question posed in the preceding Green Paper whether (i) a
capacity market that remunerates keeping power plant capacity available
should be introduced or whether (ii) the electricity market should be further
developed to become an electricity market 2.0 where the required capacities
are to be remunerated for via existing market mechanisms was answered in
favour of the second alternative by the BMWi, after having evaluated the
comments on the Green Paper.
The White Paper now includes three components containing the principles for
20 specific measures implementing the electricity market 2.0. These
measures are to be implemented particularly in the German Energy Industry
Act (Energiewirtschaftsgesetz – EnWG) and the respective ordinances,
respectively, partly through an Electricity Market Act (Strommarktgesetz).
Germany: New electricity market design ahead
1
Component 1: “Stronger market mechanisms”
>
The electricity market 2.0 relies substantially on the self-regulating
forces of the free market, which also include the acceptance of
electricity price changes. In particular, electricity price peaks are
intended to be an instrument to ensure contributions to covering
capacities that are only rarely used. In order to ensure that producers
demanding such high prices will not come under suspicion of abusing
their market power, the Federal Cartel Office (Bundeskartellamt) is to
develop clarifying guidelines for this.
>
The balancing of the balancing groups (Bilanzkreise) is to be
optimised. To achieve this, the balancing group managers are to bear a
larger share of the costs for balancing energy. The Federal Network
Agency (Bundesnetzagentur – BNetzA) is called upon to regulate this
in a determination in 2016 and to optimise the calculation of the
balancing energy prices. Furthermore, also transmission grid operators
shall always settle their balancing groups with to-the-quarter-of-an-hour
accuracy.
Component 2: “Flexible and efficient electricity supply”
>
In the opinion of the BMWi, there is a larger offer of flexibility options
than there is demand. However, according the ministry there are
hindrances to their use, which are to be reduced. Part of this is the
planned opening of the market for balancing power for other
suppliers (renewable energies, flexible consumers, storage facilities,
emergency power generators, virtual power plants, also for secondary
balancing power). To achieve this, the terms of the secondary
balancing power products are to be shortened, the secondary
balancing power is to be offered with less lead time (this also applies to
the minutes reserve), or a resale of balancing power is to be facilitated.
In future, the balancing energy rates are to be based uniformly on the
rate of the last bidder who was accepted to supply balancing energy
(uniform pricing instead of pay-as-bid). The Federal Network Agency is
called upon to regulate these points in a determination in 2016.
>
To allow also large-scale consumers to offer flexibility on the electricity
market, the system of special grid fees is to be amended by a change
to section 19 para. 2 of the German Ordinance on Grid Fees for
Electricity (Stromnetzentgeltverordnung – StromNEV).
>
In order to reduce regional differences in grid fees, uniform grid fees
are to apply to transmission grids in future. Furthermore, for new
generation facilities avoided grid fees (vermiedene Netzentgelte) are
no longer to be recognised from 2021 onwards.
>
Since not extending the grid to the last kilowatt-hour would be
significantly cheaper, the grid extension planning is to be calculated in
future on the basis of an annual power generation with onshore wind
Germany: New electricity market design ahead
2
and photovoltaic facilities reduced by up to three percent. The
provisions regarding re-dispatch and the compensation regime are to
continue to apply unchanged.
>
Furthermore, the BMWi intends to develop together with the market
participants a target model that provides guidance on how stateimposed electricity price components can be adjusted in future so that
participants adjust their behaviour with as little distortion as possible to
the wholesale prices. This includes greater alignment of generation
facilities for own consumption (Eigenerzeugungsanlagen) to electricity
price signals or including the energy source-related general economic
costs in the individual electricity or fuel prices.
>
Further measures include greater support for CHP facilities and their
integration in the electricity market, the package of ordinances on
smart metering and the fixation of the general conditions for setting up
a charging infrastructure for electric vehicles and non-discriminatory
access to it in the Electricity Market Act.
>
Finally, the package contains various reporting and transparency
obligations, to be able to adjust the capacity reserve in a timely manner
to market developments, for example.
Component 3: “Additional backup”
>
Should the electricity supply not cover the demand despite free pricing
(including price peaks) on the wholesale market, power plants outside
the electricity market are to offer a capacity reserve that will be used
should the required electricity be available neither on the day-ahead
market nor on the intraday market, nor on the balancing power market.
The power plants for the capacity reserve are to be determined by way
of a tender, with the contract being awarded preferentially to the power
plant offering the lowest costs for keeping the capacity reserve
available.
If the capacity reserve is not used, the costs for keeping it available are
to be distributed to all electricity customers. If it is used, settlement is to
take place within the existing balancing energy system, with a
minimum price of 20,000 euros/MWh applying to suppliers that could
not meet their supply obligations and thus not keep their balancing
group in balance.
>
The existing so-called grid reserve required for southern Germany
until the grids have been expanded (power plants contracted as
reserve capacity by transmission system operators) and the new
capacity reserve are to supplement each other. Any grid reserve still
being required following the tender of the capacity reserve shall be
contracted by the transmission system operators as before. For this
Germany: New electricity market design ahead
3
purpose,
the
Ordinance
on
Reserve
Power
Plants
(Reservekraftwerksverordnung) is to be extended and adjusted.
The paper is concluded with an outlook on future areas of action,
according to which the further development of the electricity market will in
particular be characterised by pursuing better integration, whether it be at a
European level, of grid and market, by interconnecting renewable energies
with other sectors (“Power-to-X”) or by optimal co-ordination between the
conventional power plants and renewable energies. The BMWi intends to
examine how the provision that from 2016 new renewable energy facilities
under the German Renewable Energies Act (Erneuerbare-Energien-Gesetz –
EEG) will not receive any remuneration in the event of spot electricity prices
being continuously negative for more than six hours can be modified in order
to prevent putting the funding of the facilities at risk.
The BMWi asks for comments on the White Paper by 24 August. The
consultation is to be followed by a Cabinet proposal for an Electricity Market
Act in October this year, which is to be passed in spring 2016.
The White Paper is available for download here (in German with summary in
English language on p. 6, 7).
Key terms for successful energy transition implementation
One day prior to the publication of the electricity market White Paper, the
Federal Ministry for Economic Affairs and Energy (Bundesministerium für
Wirtschaft und Energie – BMWi) presented the “Key terms for successful
energy transition implementation” (“Eckpunkte für eine erfolgreiche
Umsetzung der Energiewende”), which the party leaders of the government
coalition of CDU, CSU and SPD had agreed upon on 1 July 2015.
Apart from the release of the White Paper’s contents, the paper also
addresses the issue of the planned and recently heavily discussed energy
sector contribution to CO2 reduction. Instead of a “climate change levy”
(“Klimaabgabe”) on conventional power plants in the form of a mandatory
acquisition of additional emission trading certificates, the announced
contribution to reduction in the amount of 22 million tonnes of CO2 is now to
be generated through a combination of various measures:
>
11 million tonnes of CO2 are to be saved through a step-by-step
decommissioning of lignite-fired power plant units with a total
capacity of 2.7 GW, following those units having been for four years
under contract for the reserve capacity developed in the White Paper. A
further 1.5 million tonnes of CO2 are to be saved by the lignite industry
itself, while it remains to be decided in what legal form this will be
implemented. The Federal Government intends to co-ordinate any
legal issues regarding state aid with the EU Commission beforehand.
>
The Federal Government hopes that as a result of the planned reform
of the German Co-Generation Act (Kraft-Wärme-Kopplungsgesetz)
Germany: New electricity market design ahead
4
the existing coal-fired CHP aggregates will be replaced by gas-fired
CHP aggregates, potentially leading to 4 million tons of CO2 savings,
in combination with the use of new aggregates. It intends to persuade
the EU Commission that the option of partial exemption from the
surcharge under the German Renewable Energies Act (EneuerbareEnergien-Gesetz – EEG) for CHP facilities should be maintained even
beyond 2017.
>
The remaining 5.5 million tonnes of CO2 are to be saved by way of
publicly financed efficiency measures in buildings, municipalities,
the industry and the rail sector.
In reaction to the to some extent considerable opposition against the
extension of the transmission grids, which is necessary in order to
maintain a single price zone in Germany, underground cabling is to be given
priority to overhead lines when building direct current transmission lines in the
future. In the area of alternating current transmission lines, the technical
development of underground cabling is to be promoted by pilot schemes.
Overall, the use of existing transmission lines and infrastructures is to be
intensified. The paper also contains specific planning requirements for the
“SuedLink” and “Südost” direct current transmission lines.
Finally, the paper also reports on the stress test which, until September 2015,
reviews the completeness of cost assumptions and the correct creation of
provisions by the nuclear power station operators, comparing these
provisions with the companies’ assets. On the basis of this stress test, a
commission still to be appointed is to develop recommendations as to how
the financing of the nuclear power phase-out can be borne by the operators
while maintaining their economic performance.
Germany: New electricity market design ahead
5
Contacts
For further information
please contact:
Dr. Kai Uwe Pritzsche
Partner
(+49) 30 21496 262
[email protected]
Thomas Schulz
Partner
(+49) 30 21496 223
[email protected]
Christopher Bremme
Partner
(+49) 30 21496 458
christopher.bremme@
linklaters.com
Sebastian Pooschke
Managing Associate
(+49) 30 21496 163
Author: Sebastian Pooschke, Ruth Losch
sebastian.pooschke@
linklaters.com
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Germany: New electricity market design ahead
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