30 Aug 2016 | Sven Egenter

Agreement with EU Commission clears way for German power market reform

The German government and the EU Commission have reached an agreement on state-aid related aspects of the country’s new power market law and other energy policy issues, clearing the way for the “most important reform” since the market liberalisation, German energy minister Sigmar Gabriel told a press conference on Tuesday.

The agreement includes the approval of the exemptions from the renewables surcharge for power produced by industrial firms for self-consumption with existing plants, unless those facilities are modernised “substantially”. The new law regulating state support for combined heat and power (CHP) plants will be changed following the agreement to include tenders for new or modernised facilities with a capacity of 1-50 megawatts. “With the agreement we are creating planning security for businesses and the industry,” said Gabriel.

The German government has adopted a series of sweeping reforms over the past three years in order to push forward and better coordinate the country’s Energiewende, a dual move to phase-out nuclear power and reduce carbon emissions through the introduction of renewable energy sources and higher energy efficiency. Among the most prominent changes are the introduction of an auction-based system to determine support for renewables and a new electricity market set-up based on an energy-only market, plus a capacity reserve for times when market forces fail to balance demand and supply.

The economy ministry said in a press release that in its view the agreement meant that the relevant laws were in line with EU state aid regulations and that the way was now paved for the official go-ahead by the  European Commission.

The German government agreed with the Commission to conduct an analysis of its power system in autumn 2016 to check if such a capacity reserve is really needed. Should the analysis confirm the necessity, the capacity reserve will be launched as planned in the reform power market law from summer 2016.

Energy minister Gabriel said that the EU Commission had not only cleared Germany’s power market reform but signalled that it would be a model for the upcoming EU directive.

The German Chemicals Industry Association (VCI) and the Association of Local Utilities (VKU) both welcomed the agreement as an important step towards more certainty. However, the fact that companies which modernised their power plants would have to pay 20 percent of the renewables surcharge on electricity they use for their own consumption would drive the energy costs of many companies up, VCI managing director Utz Tillmann said in a press release. VKU president Michael Ebling noted that real competition was hard to achieve in tenders for combined heat and power plants because those were highly dependent on the local situation. The Association of Energy and Water Industries (BDEW) urged the government to put the agreed changes on CHP into law quickly to provide utilities with the necessary certainty for the investments needed to achieve the government’s goals, which include a reduction of carbon emissions through an increase in CHP.

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