Energy market: sustainability and competitiveness
According to the German government, the measures to ensure a sustainable energy market in Germany are aimed at accelerating the energy transition, strengthening the competitiveness of industry and making the energy supply in Germany more sustainable and resilient.
To this end, the electricity tax for the current group of beneficiaries will be permanently reduced to the EU minimum of EUR 0.50/MWh (0.05 ct/kWh) and electricity price compensation (PPC) will be extended until 2030. Other sectors of the economy, such as parts of the chemical and glass processing industries, should also be able to benefit from the SPK in future.
The potential of battery storage systems is to be increased by means of undistorted price signals, time-variable regional grid fees and the optimization of the integration of renewable energy systems - the Federal Network Agency is partly responsible for the design of the measures. The agency is also to review discounts and exemptions from grid fees in order to efficiently promote the system usefulness of battery energy storage systems. In future, battery storage systems are also to be promoted via the technology-neutral capacity market.
Electricity market design
A new electricity market design is intended to make the electricity market more flexible in order to ensure a secure and affordable supply while at the same time expanding renewable generation. The German government is focusing on several key measures to effectively restructure the electricity market:
Flexibility is to be encouraged by removing obstacles on the supply and demand side and by introducing flexible tariffs and a more flexible grid fee structure.
The expansion of renewable energies is to be supported and driven forward by switching support to investment costs (separate capacity mechanism). The instruments required for this are initially to be tested in real laboratories. The focus is on cost efficiency and market integration. The Climate Neutral Electricity System Platform is responsible for developing the measures.
In the future, EEG subsidies will be phased out completely with the end of coal-fired power generation. From January 1, 2025, the German government will initially discontinue support for new plants with negative electricity prices. At the same time, it is gradually lowering the threshold for the self-marketing of renewable energies to 25 kW by 2028 and making it easier for grid operators to control renewable energy systems. Self-marketing and system control are to be digitalized and made less bureaucratic by 2026 at the latest. In addition, measures will be taken to make the use of biomass more flexible in order to reduce subsidy costs.
A technology-neutral and functioning capacity mechanism is announced in the Power Plant Security Act for 2028.https://www.bmwk.de/Redaktion/DE/Pressemitteilungen/2024/07/20240705-klimaneutrale-stromerzeugung-kraftwerkssicherheitsgesetz.html This will make it possible to integrate run-of-river power plants, pumped storage, battery storage, bioenergy plants and flexible loads on a competitive basis. In addition, the Power Plant Security Act is intended to ensure the rapid development of additional power plant capacities.
The law comprises two main pillars: Firstly, decarbonization through the construction of 5 gigawatts of new H2-ready gas-fired power plants, 2 gigawatts of H2-ready modernizations, 500 megawatts of pure hydrogen power plants and 500 megawatts of long-term storage. These plants must switch to hydrogen after eight years. Secondly, security of supply with a further 5 gigawatts of new gas-fired power plants that step in during periods of low wind and sunshine. The new power plants are mainly being built in the "grid south" of Germany and are intended to improve grid stability. The first tenders are planned for the end of 2024/beginning of 2025. These include the construction of 5 GW of hydrogen-capable natural gas power plants and a further 5 GW to secure supply in order to ensure system adequacy by 2028 and avoid double funding.
Grid fees
The German government is planning several measures to reduce grid costs and stabilize grid fees. These include the introduction of time-variable grid fees for system-beneficial grid use and improving the use of surplus electricity, as well as reviewing the payment of "avoided grid fees" to electricity producers in distribution grids. Furthermore, virtual lines and grid equipment are to be developed in order to increase efficiency in grid operation. There is also a focus on the grid-friendly use of power plants and the examination of joint procurement options for materials in grid expansion.
In order to promote flexible electricity consumption by companies that benefit from individually reduced grid charges in accordance with Section 19 (2) sentence 1 or sentence 2 of the Electricity Grid Charges Ordinance (StromNEV), existing barriers to flexibility will be removed. For companies that are unable to provide flexibility, an extension of the regulations in accordance with Section 19 of the StromNEV should be considered.
The implementation of many of these measures falls within the remit of the Federal Network Agency. The aim is to ensure cost-efficient system efficiency in the electricity grid and market and to create long-term planning security.
Assessment of the growth package
Unfortunately, the growth package published by the traffic light government is not yet specific enough in many areas to be able to draw conclusions about how the measures will work. In particular, the question of the design of the planned capacity mechanism, which has long been awaited by all stakeholders, has once again not been fully answered.
We consider the efforts to simplify approvals and the promise to give companies more planning horizons in many areas to be positive. In addition, the reform of the individual grid fee appears to make the flexibility of processes the basis for granting a grid fee reduction in future, where this exists. We very much welcome this, as it recognizes and rewards the usefulness of flexibility to the system.
The actual design of the measures described will ultimately be decisive in achieving the goals set and establishing Germany as a leading location for innovation and sustainability. We hope that the reduction of bureaucracy and the promised planning security will be decisive here.
