Market Reform Policy Options – Case Example Germany
(Room D201-D202, Elicium, Second Floor)
09 Jun 15
4:00 PM
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5:30 PM
Tracks:
Theme: Europe's Transitioning Power Sector
Strong incentive schemes implemented by EU member states to reduce emissions have resulted in large amounts of renewable energy sources added to Power Systems. As a consequence of the variable energy production of these sources and the need to maintain a stable electricity system, increasing amounts of flexibility are required to deal with fluctuations. At the same time, low marginal cost renewable generation has put electricity prices under pressure and push other generation out of the merit order. Profitability of thermal generation is under pressure and required investments in flexibility are not taking place, threatening security of supply from both adequacy and flexibility point of view.
European and national policy makers are trying to counter these developments through reform of electricity markets while keeping a sustainable, reliable and affordable Power System in focus.
This paper will describe two electricity market reform policy options: an updated Energy Only Market (EOM2.0) and a Capacity Market (CM). The paper will use Germany, a European front-runner with respect to installed RES capacity, as case example and compare the two options on following core policy goals:
• Climate implications: analyse and quantify the impact of a CM / EOM2.0 on the total carbon emissions from the German power sector
• System costs and costs to consumer: quantify the total costs to the system for energy (wholesale power costs) and any payment under a CM
• Industrial policy implications: analyse and quantify the impact of a CM / EOM2.0 on the earnings situation of a selection of sample market portfolios
The paper will conclude which market reform option delivers best to the policy goals and will make further recommendations.