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One Electricity Market for the “Energiewende”

Greenpaper for Electricity Market Design published by the German Federal Ministry of Economy

Summary of the Greenpaper 

The electricity market is undergoing a period of transition. Renewable energy will take on a greater role in the power supply as the use of nuclear energy in Germany will end in 2022 and the European markets for electricity will continue to grow together.

The role of the electricity market will remain the same.  It must maintain a balance between power generation and consumption, especially in view of the fact that the shares of wind and solar energy in the power supply mix increase. To achieve this, it has to fulfil two tasks: Firstly, it must ensure that sufficient capacity is available (i.e. the maintaining of reserve capacity) and secondly, that this capacity is used at the right time and to the extent necessary (i.e. appropriate use of capacity).

The Green Paper is concerned with how these two tasks will be fulfilled in the future.
It focuses on how to develop a future market design and regulatory framework for the electricity sector that ensures that the power supply is secure, cost-efficient and environmentally friendly. Against this background, various actions must be taken to accomplish the two tasks.

The use of available capacity must be optimised. The Green Paper contains a number of measures that seek to fulfil the task of appropriate use of capacity in a more secure and efficient way. They include improving the bal- ancing group management, expanding the network and further developing the balancing energy markets. These measures are deemed to be “no regret” measures, i.e. they make good sense in every scenario and are important for the changing electricity market.

The maintaining of sufficient capacity requires a decision of principle. Two basic approaches are available for the long-term development of the electricity market: Do we want an optimized 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)?

The uncertainties of the transition period should be addressed in each case by maintaining reserve capacity as an additional safeguard. This applies both in the case that the electricity market is optimized while its current fundamental structure is maintained and in the case that a capacity market is introduced. International experience shows that the creation of capacity markets takes several years from the fundamental decision until the time that they become fully operational. It is therefore necessary in any case to build a safeguard into the system in the form of reserve capacity for the transition phase.

The Federal Ministry for Economic Affairs and Energy shall consult the Green Paper .The consultation will be followed by a White Paper at the end of May 2015. The White Paper will also be publicly consulted (until September 2015). This will be followed by the drafting of the necessary legislation.

The Statements to the Greenpaper can be sent until 1st of March 2015 to the following email address: gruenbuch-trommarkt@bmwi.bund.de

 

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