A New Market Design for the German
Electricity Market –
Local and European Context
Claas F. Hülsen
1
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Agenda
The German Electricity Market – Changes 2000 – 2013
A New Market Design in Germany – Building Blocks and Elements
Germany and Europe – Way Forward 2016 and Beyond
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The German Electricity Market – Changes 2000 – 2013
Energy policy has taken two major shifts over the last few decades. The need for an
appropriate market design has changed accordingly.
Energy policy in the energy
triangle
Year
1998
De-regulation of power & gas industry
2000
2011
Renewable Energy Act EEG (2000) - boost of
Wind and PV
Nuclear Phase out planned for 2030 (2000)
ETS put in place (2005)
EU Climate goals 2020 (2007)
EU Act on Renewable Energy (2009)
New Governmental Energy concept
(September 2010)
Extension of nuclear power (2011) +12 years on
average
Security of Supply
1
2
Major Political
Developments
Major
developments
3
Fukushima Catastrophe: 11. March 2011
Affordability
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Environment
2011
until
now
Decision on earlier nuclear phase out
Steep increase in renewable energy build
Increasing network congestion
EEG surcharge increases to >6 ct/kWh
The German Electricity Market – Changes 2000 – 2013
To summarise, renewables have changed the economics of the system and thus
raises the question of renewing the market design.
Source: DNV GL
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The German Electricity Market – Changes 2000 – 2013
The German generation sector has seen a substantial growth in decentralised
renewable generation in the last decade.
RES gradually displaced conventional thermal generation
Today, we see a share of ~ 27 % of renewables in terms of energy provided. The share will
increase to the predicted amount of 50% by 2030
In particular, wind onshore and PV are the main contributors
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Renewables
Conventional
Generation
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Source: Federal Ministry of Economic Affairs
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The German Electricity Market – Changes 2000 – 2013
Renewable feed-in has changed electricity prices and the refinancing conditions
significantly.
Electricity prices are determined at the power exchange – renewable energy has very low
marginal cost and will be dispatched first – due to this and European market coupling, prices
have been significantly affected
Refinancing for (needed) conventional plants (like gas peakers) becomes ever more
problematic
Source: DNV GL based on EEX data
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Agenda
The German Electricity Market – Changes 2000 – 2013
A new Market Design in Germany – Building Blocks and Elements
Germany and Europe – Way Forward 2016 and Beyond
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A new Market Design – Building Blocks and Elements
A structured process initiated by the BMWi aims to find a new and appropriate
market design for the coming decade.
Between early 2013 and now, Germany has
actively discussed needs for and
alternatives to a new market design
The Federal Ministry of Economic affairs has
between 2013 and 2015 actively pushed the
process by:
– Academic research on market failure and
design options
– Publishing and consulting the ‘green
paper (2014)
– Publishing and consulting the ‘white paper
(2015)
– Drafting new energy legislation is still
ongoing
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A new Market Design – Building Blocks and Elements
A general decision taken is that Germany will rely on an Energy Only Market (EOM)
– supported by a set of additional measures.
“Anyhow” measures
Strengthen
price
signals
Stronger
European
cooperation
Main measures
Grid reserve
Capacity
reserve
EOM 2.0
enhancements
Strengthen
flexibility
Germany will:
– Rely on an Energy Only
Market (EOM) coupled with a
capacity reserve
Grid
capacity
With the white paper a number of
design decisions now become
clear
Climate
goals
International
cooperation
– Rely on a number of measures
that are called “anyhow
measures”
Security of supply is a major
concern – but is seen to be
guaranteed also in the future with
the taken measures
Source: DNV GL
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A new Market Design – Building Blocks and Elements
The European discussion
In parallel to the debates in Germany (and UK+FR) market design is also activity
consulted by the EC.
EU Commission
Examples:
EOM preferred
CM preferred
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•
CM only as temporary
element
•
CM
not preferring specific
technologies
•
Foster cross boarder trade
Agenda
The German Electricity Market – Changes 2000 – 2013
A new Market Design in Germany – Building Blocks and Elements
Germany and Europe – Way Forward 2016 and Beyond
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Germany and Europe – Way Forward
The agenda of industry players in the coming years will be heavily loaded. They will
need to adopt their business strategies even more quickly in order to survive.
Implications for the coming years in Germany:
Grid expansion in Germany is a ‘must-workproject’
Price volatility is likely to grow– reliable capacity
is likely to shrink
Decentralised aggregation will increase - enabling
new business options for incumbents but also
smart newcomers
Several measures will most likely lead to some
(desired) industry consolidation on the utility side
as bigger portfolios will benefit
Source: DNV GL
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Further changes in a number of design elements
will become necessary in order to make the
market design work: e.g. grid charge system v.s.
need for flexibility
Germany and Europe – Way Forward
The debate has just begun. We will continue with the changes initiated over the
coming decade(s).
Implications for the coming years in Europe:
Security of Supply
As RES shares will be - politically driven - also
rising in other EU countries there will be further
drive in market design questions
The parallel existence of EOM and CM designs will
need to be watched closely
Countries with growing renewable share will
become – in the search of flexibility and reliability
–strong advocates of grid expansion in Europe
?
Affordability
Environment
Additional connections e.g. to Norway to
incorporate the flexibility of Hydro Power will
become more interesting
The value of Hydro power is likely to grow on the
medium run due to flexibility needs
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Contact
Claas F. Hülsen
Head of Department Market & Policy Development
[email protected]
+49 228 44690-34
+49 172 4085218
Kurt-Schumacher-Str. 8, 53113 Bonn
www.dnvgl.com
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