Making the economic value of security of supply visible
- Stakeholder Platform on Electricity Market Design publishes final paper
- Availabilities are increasingly becoming the "reserve currency" in the electricity market
- Further developed electricity market design must ensure the financing of supply-dependent and controllable generation plants and provide investment incentives
The current energy price crisis has led to the electricity market moving into the public spotlight in recent weeks. Temporary interventions are now being made in the electricity market at European and national level in the short term to cushion the economic and social consequences. However, the current discussions about the consequences of the crisis and the interventions in the electricity market make it all the more clear that the fundamental re-evaluation of the electricity market design as a whole must be initiated more quickly and urgently than ever before.
The Stakeholder Platform on Electricity Market Design - consisting of representatives from associations, companies, think tanks and trade unions - has been discussing the challenges and opportunities associated with the further development of the electricity market design since July 2022. The impulses contained in their final paper are intended to support the discussions of the planned "Climate-neutral electricity system" platform of the BMWK on the further development of the market design. The goal is to create a climate-neutral, affordable and secure electricity system. This requires considerable investments, for which, however, there is currently no long-term calculable basis.
The established energy-only market (EOM) with its so-called "merit order" is still effective, efficient and impactful for the functions and goals for which it was developed and implemented. However, it is also increasingly revealing deficits when it comes to ensuring security of supply with electricity. In addition, the EOM does not provide sufficient incentives for investments in supply-dependent power generation plants, i.e. in particular photovoltaic and wind power plants, as the revenue streams that can be expected in the long term do not match the risk profile of potential investors.
Only new investments in low-cost generation technologies can have a lasting dampening effect on prices, as they lead to an increase in supply at low electricity generation costs. Therefore, their refinancing must be permanently secured.
On the other hand, only new investments in controllable capacities and availabilities can permanently guarantee security of supply, especially for the periods when there is not enough solar and wind power available. Despite flexible operation and the use of climate-neutral fuels, such as hydrogen or biomass in particular, sufficient economic incentives must be created for them on a permanent and plannable basis.
For this reason, in addition to the revenue stream from pure electricity generation, another revenue stream must be established for availability. Only in this way can the economic value of security of supply be made visible and thus priced. The future market design must also not hinder a demand-oriented, efficient and speedy grid expansion.
Market incentives should be created for additional flexibility to be created on the supply and demand side, without this triggering obligations on the demand side, such as demand-side management. Flexibility should be worthwhile, but not become a constraint.
The partners of the Stakeholder Platform for Electricity Market Design are available for dialogue with their expertise and perspectives.
Amprion Tobias Burgholz, Tel. +49 173 4652396, firstname.lastname@example.org
About Amprion: Amprion GmbH is one of four transmission system operators in Germany. Our extra-high-voltage network is 11.000 kilometres long and transports electricity across an area that extends from Lower Saxony to the Alps. Around a third of Germany’s economic output is generated there. Our power lines are lifelines of society: They secure jobs and quality of life for 29 million people. We keep the network stable and safe – and prepare the way for a climate-compatible energy system by expanding our network. Around 2.200 employees in Dortmund and at more than 30 other sites help make sure the lights never go out. We also perform overarching operations for integrated grid systems in Germany and Europe.
BDEW - German Association of Energy and Water Industries Jan Ulland, Tel. +49 30 300199-1160, email@example.com
About BDEW: The German Association of Energy and Water Industries (BDEW) and its regional organisations represent over 1,900 companies. The membership comprises both privately and publicly owned companies at the local, regional and national level. They account for around 90 percent of the electricity production, over 60 percent of local and district heating supply, 90 percent of natural gas, over 90 percent of energy networks and 80 percent of drinking water extraction as well as around a third of wastewater disposal in Germany.
BDI Anna-Lena Gleich, Tel. +49 171 7463789, A-L.Gleich@bdi.eu
About BDI: The BDI is the umbrella organisation of German industry and industry-related service providers. It represents 40 industrial sector federations and has 15 regional offices in the German federal states. The BDI speaks for more than 100,000 private enterprises employing around 8 million people.
BEE - German Renewable Energy Foundation Adrian Röhrig, Tel. +49 30 2758170 -16, firstname.lastname@example.org About BEE: As the umbrella organization of the renewable energy sector in Germany, the German Renewable Energy Foundation (BEE) pools the interests of professional and state associations, organisations and companies of all sectors and application areas of renewable energies. In its substantive work, the BEE covers topics relating to energy generation, energy transmission via grid infrastructures as well as energy consumption. As the central platform for all stakeholders of the modern energy industry, the BEE is the first point of contact for politics, the media and the public. Our aim: 100 percent renewable energy in the areas of electricity, heat and mobility.
European Federation of Energy Traders (EFET) Nataliya Askerova, email@example.com
About EFET: The European Federation of Energy Traders (EFET) promotes and facilitates European energy trading in open, transparent and liquid wholesale markets, unhindered by national borders or other undue obstacles. We build trust in power and gas markets across Europe, so that they may underpin a sustainable and secure energy supply and enable the transition to a carbon neutral economy. EFET currently represents more than 120 energy trading companies, active in over 27 European countries.
RWE Matthias Beigel, Tel. +49 201 51795008, Matthias.firstname.lastname@example.org
About RWE: RWE is leading the way to a green energy world. With an extensive investment and growth strategy, the company will expand its powerful, green generation capacity to 50 gigawatts internationally by 2030. RWE is investing more than €50 billion gross for this purpose in this decade. The portfolio is based on offshore and onshore wind, solar, hydrogen, batteries, biomass and gas. RWE Supply & Trading provides tailored energy solutions for large customers. RWE has locations in the attractive markets of Europe, North America and the Asia-Pacific region. The company is responsibly phasing out nuclear energy and coal. Government-mandated phaseout roadmaps have been defined for both of these energy sources. RWE employs around 19,000 people worldwide and has a clear target: to get to net zero by 2040. On its way there, the company has set itself ambitious targets for all activities that cause greenhouse gas emissions. The Science Based Targets initiative has confirmed that these emission reduction targets are in line with the Paris Agreement. Very much in the spirit of the company’s purpose: Our energy for a sustainable life.
VIK Alexander Ranft, Tel. +49 30 212492-12, email@example.com
About VIK: The VIK has represented the interests of industrial and commercial energy users in Germany for 75 years. It is a cross-sectoral trade association with member companies from a wide range of industries, such as aluminium, chemicals, glass, paper, steel and cement. The VIK advises its members on all energy and energy-related environmental issues. About 80 percent of the industrial electricity consumption, about 90 percent of the utility-independent industrial energy use and about 90 percent of the utility-independent electricity generation in Germany are united in the association.
VKU - German Association of Local Public Utilities
Alexander Hauk, Tel. +49 30 58580-208, firstname.lastname@example.org
About VKU: The German Association of Local Public Utilities „Verband kommunaler Unternehmen” (VKU) represents around 1,500 local public utilities in Germany, operating in the sectors of energy, water/waste water, waste management and telecommunication. In 2019, VKU’s members, which have more than 283,000 employees, generated a turnover of around 123 billion euro of which more than 13 billion euro were reinvested. In the end-customer segment, VKU’s member companies have a market share of 62 percent in the electricity market, 67 percent in the natural gas market, 91 percent in the drinking water sector, 79 percent in heating supply market and 45 percent in waste-water disposal. Every day, they dispose of 31,500 tons of municipal waste through separate collection and take a vital role in ensuring recycling rates of 67 percent, which rate the highest within the EU. Additionally, more and more local public utilities are committed to the deployment of broadband infrastructure. 203 members invest more than 700 million euro every year. When deploying broadband infrastructure, 92 percent of local public utilities rely at least on fibre to the building. We keep Germany running - climate-neutral, efficient, liveable. Our contribution for today and tomorrow: #Daseinsvorsorge. Our positions: 2030plus.vku.de
VDMA Power Systems Beatrix Fontius, Tel. +49 69 6603 1886, email@example.com
About VDMA Power Systems: VDMA Power Systems is a trade association of the German Engineering Federation VDMA e.V. The trade association represents the interests of manufacturers of wind energy and hydropower plants, fuel cells, thermal plants and storage systems in Germany and abroad. For all of them, VDMA Power Systems serves as an information and communication platform for all industry topics such as energy policy, legislation, market analyses, trade fairs, standardisation and press and public relations.
50Hertz Alexander Sewohl, Tel. +49 305150 4605, Alexander.firstname.lastname@example.org
About 50Hertz: 50Hertz operates the electricity transmission system in the north and east of Germany, which it expands as needed for the energy transition. Our extra high voltage grid has an electrical circuit length of more than 10,000 kilometres, or the distance between Berlin and Rio de Janeiro. The 50Hertz control area covers Brandenburg, Mecklenburg-Western Pomerania, Saxony, Saxony-Anhalt, and Thuringia, as well as the city states of Berlin and Hamburg. Within these regions, 50Hertz and its around 1,400 employees ensure that 18 million people are supplied with electricity around the clock. 50Hertz is a forerunner in the field of secure integration of renewable energy. In our grid area, we want to integrate 100 percent renewable energies securely into the grid and system by 2032 - calculated over the year. The shareholders of 50Hertz are the Belgian holding Elia Group (80 percent), which is listed on the stock exchange, and the KfW bank group with 20 percent. As a European TSO, 50Hertz is a member of the European Network of Transmission System Operators for Electricity (ENTSO-E).