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Consultations on electricity market 2.0 underway
The future electricity market design is intended to maintain energy security in the face of growing shares of renewables. The Federal Ministry for Economic Affairs and Energy is therefore developing the electricity market into an "electricity market 2.0". It will be backed up by a capacity and climate reserve. The Ministry published the corresponding draft act to further develop the electricity market last week. The Länder and associations can comment on it up to the end of September.
A framework for tomorrow’s electricity market
The draft legislation contains several principles to create a secure and efficient electricity market:
- Guaranteeing free price formation: the principle of free pricing in electricity trading is to be anchored in law. Prices need to be free if they are to send the right market signals and show the market actors how scarce or abundant electricity is at any given time.
- Security of supply: an ongoing monitoring process will use the latest methods to see whether Germany’s supply actually is secure.
- Capacity and climate reserve: this will safeguard the electricity supply against unforeseeable events. At the same time, it will help to cut carbon dioxide emissions from lignite-fired power stations.
- Grid reserve: the grid reserve will safeguard the stability of the electricity grid.
The draft legislation provides a good response to the central question: how can our electricity supply remain as secure as it is today in the face of increasing amounts of intermittent renewables-based electricity? The answer from the Federal Ministry for Economic Affairs and Energy is: through flexibility and fair competition. This refers to flexible power plants and consumers, combined heat and power (CHP) installations, storage facilities and European electricity trading. Thanks to the new Act, all of these flexible capacities are to be able to finance themselves via the market. This means that Germany’s electricity supply can be ensured on a low-cost basis.
The draft Act is the outcome of several months of coordination and consultation within Germany and with our European neighbours. Back in October 2014, the Federal Ministry for Economic Affairs and Energy published the key elements for the electricity market in a Green Paper and held a four-month-long, broad-based public consultation. Some 700 comments were received from authorities, associations, trade unions, companies and private individuals. They fed into the White Paper "An Electricity Market for Germany’s Energy Transition", which the Ministry presented at the beginning of July. The Electricity Market Act will implement many of the measures proposed in the White Paper.
What are the next steps?
The draft Electricity Market Act is scheduled to be adopted by the federal cabinet in November. The legislative process is to be completed in spring 2016.