Germany needs new power market design to enable renewables growth – industry
Clean Energy Wire
The German power market design needs an overhaul to reach the new government's share of 80 percent renewables in the electricity system by 2030 and to ensure a secure supply and targeted build-up of renewables and flexible power providers, a new paper presented by the German Renewable Energy Federation (BEE) shows. The scenario study, conducted by Fraunhofer Institutes for Energy Economics and Grid Operation (IEE) and Solar Energy Systems (ISE) as well as the law firm Becker Büttner Held, emphasises that the current energy-only market will not give enough impetus to more renewable capacities being built, and will not allow for a phase-out of subsidies for renewable power producers. This is because more renewable capacity will lower the electricity price at the exchange, taking away the economic basis for the running of these operations. The central lever to alleviate this problem is to make electricity supply and demand more flexible, the researchers find. By assuming that bioenergy capacities similar to today’s amounts will remain in the system throughout the next decades and are accompanied by (green gas) CHP plants and storage, enough controllable capacity is available for a secure power supply, while only very little hydrogen-gas power plants need to be added. With the new market design, renewable electricity generators would be able to operate without state funding within the 2040s, the paper states. BEE president Simone Peter said that their scenario allowed for a coal exit in 2030 while ensuring a secure power supply without relying heavily on electricity imports. “It underlines that the renewable sectors now want to take responsibility for the overall system,” Peter said at a press conference.
The BEE paper provides a first input to the new government’s platform for a “climate neutral electricity system” that is to start a stakeholder process in 2022. In its coalition treaty, the government said that it will make concrete proposals for a new power market design in 2022 and evaluate capacity mechanisms and other flexibility options to ensure supply security during the nuclear and coal phase-outs.