A New Market Design for the German Electricity Market Local and European Context

Transcription

1 A New Market Design for the German Electricity Market Local and European Context Claas F. Hülsen 1 SAFER, SMARTER, GREENER

2 DNV GL Leading Energy Services Energy and Renewables Advisory DNV GL -Energy Energy and Renewables Advisory Renewables Certification Power Testing, Inspections and Certification Combination of business- and engineering consulting: Market & Policy Development Renewables advisory Power Systems Planning Project Management & Technical Services Operational Excellence 2

3 Agenda The German Electricity Market Changes A New Market Design in Germany Building Blocks and Elements Germany and Europe Way Forward 2016 and Beyond 3

4 The German Electricity Market Changes Energy policy has taken two major shifts over the last few decades. The need for an appropriate market design has changed accordingly. Affordability Energy policy in the energy triangle Security of Supply Environment Year Major Political Developments 1998 De-regulation of power & gas industry until now Major developments 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 Fukushima Catastrophe: 11. March 2011 Decision on earlier nuclear phase out Steep increase in renewable energy build Increasing network congestion EEG surcharge increases to >6 ct/kwh 4

5 The German Electricity Market Changes To summarise, renewables have changed the economics of the system and thus raises the question of renewing the market design. Source: DNV GL 5

6 The German Electricity Market Changes 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 Source: Federal Ministry of Economic Affairs 6

7 The German Electricity Market Changes 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 7

8 Agenda The German Electricity Market Changes A new Market Design in Germany Building Blocks and Elements Germany and Europe Way Forward 2016 and Beyond 8

9 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 9

10 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 Grid capacity enhancements Strengthen flexibility Stronger European cooperation Capacity reserve Climate goals Main measures Grid reserve EOM 2.0 International cooperation With the white paper a number of design decisions now become clear Germany will: Rely on an Energy Only Market (EOM) coupled with a capacity reserve 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 10

11 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 CM only as temporary element CM not preferring specific technologies Foster cross boarder trade Examples: EOM preferred CM preferred 11

12 Agenda The German Electricity Market Changes A new Market Design in Germany Building Blocks and Elements Germany and Europe Way Forward 2016 and Beyond 12

13 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: Source: DNV GL 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 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 13

14 Germany and Europe Way Forward The debate has just begun. We will continue with the changes initiated over the coming decade(s). Security of Supply? Affordability Environment Implications for the coming years in Europe: 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 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 14

15 Contact Claas F. Hülsen Head of Department Market & Policy Development Kurt-Schumacher-Str. 8, Bonn SAFER, SMARTER, GREENER 15

16 Our most recent publications Most comprehensive study on European hydropower on behalf of European Hydropower Initiative The hydropower sector s contribution to a sustainable and prosperous Europe - Postion Paper with EFS on Electric Vehicle market Exploring collaborations between the automotive and utilities sector to create new business opportunities in the Emobility field - Study with Agora Energiewende Potential interactions between capacity mechanisms in France and Germany