Energy Market: Sustainability and Competitiveness
According to the federal 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 Germany’s energy supply 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 0.50 euros/MWh (0.05 ct/kWh), and the electricity price compensation (SPK) will be extended through 2030. In addition, other sectors of the economy, such as parts of the chemical and glass processing industries, will be eligible for relief through the SPK in the future.
The potential of battery storage systems is to be maximized through undistorted price signals, time-varying regional grid fees, and the optimization of renewable energy plant integration—the Federal Network Agency is responsible for designing some of these measures. The Agency is also tasked with reviewing discounts and exemptions for grid fees in order to efficiently promote the system-supporting role of battery energy storage systems. In the future, battery storage systems will also be supported through 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 expanding renewable generation. The federal government is relying on several key measures to effectively restructure the electricity market:
Flexibility is to be encouraged by removing barriers on both the supply and demand sides, as well as by introducing flexible rates and a more flexible grid fee structure.
The expansion of renewable energy is to be supported and driven forward by shifting subsidies to investment costs (a dedicated capacity mechanism). The necessary instruments will first be tested in real-world laboratories. The focus is on cost-effectiveness and market integration. The Climate-Neutral Electricity System Platform is responsible for developing these measures.
Looking ahead, EEG subsidies will phase out entirely with the end of coal-fired power generation. Starting January 1, 2025, the federal government will initially suspend subsidies for new plants when electricity prices are negative. At the same time, it will gradually lower the threshold for self-marketing of renewable energy to 25 kW by 2028 and make it easier for grid operators to control renewable energy plants. By 2026 at the latest, self-marketing and plant control are to be digitized and streamlined. In addition, measures are being taken to make biomass use more flexible in order to reduce subsidy costs.
A technology-neutral and effective capacity mechanism is announced in the Power Plant Safety Act for the year 2028.https://www.bmwk.de/Redaktion/DE/Press Releases/2024/07/20240705-climate-neutral-electricity-generation-Power-Plant-Security-Act.html This will enable the competitive integration of run-of-river power plants, pumped-storage facilities, battery storage systems, bioenergy plants, and flexible loads. In addition, the Power Plant Security Act is intended to ensure the rapid development of additional power plant capacity.
The law has two main pillars: First, decarbonization through the construction of 5 gigawatts of new H2-ready gas-fired power plants, 2 gigawatts of H2-ready retrofits, 500 megawatts of pure hydrogen power plants, and 500 megawatts of long-term storage. These plants must switch to hydrogen after eight years. Second, ensuring security of supply with an additional 5 gigawatts of new gas-fired power plants that will step in during periods of low wind and solar generation. The new power plants will be built primarily in the „grid-related south“ of Germany and are intended to improve grid stability. The first tenders are planned for late 2024/early 2025. These will include the construction of 5 GW of hydrogen-capable natural gas power plants and an additional 5 GW to secure the supply, in order to ensure system reliability by 2028 and avoid duplicate funding.
Grid fees
The federal government is planning several measures to reduce grid costs and stabilize grid fees. These include the introduction of time-varying grid tariffs for grid usage that benefits the system, as well as improving the utilization of surplus electricity; in addition, the payment of „avoided grid tariffs“ to electricity generators in distribution grids is being reviewed in particular. Furthermore, virtual lines and grid-related equipment are to be developed to increase the efficiency of grid operations. Another focus is on the grid-supporting use of power plants and the exploration of joint procurement opportunities for materials used in grid expansion.
To promote flexible electricity consumption by companies that benefit from individually reduced grid fees pursuant to Section 19(2), first or second sentence, of the Electricity Grid Fee Ordinance (StromNEV), existing barriers to flexibility will be removed. For companies that are unable to provide flexibility, an extension of the provisions under Section 19 of the StromNEV that complies with state aid rules should be considered.
The Federal Network Agency is responsible for implementing many of these measures. The goal is to ensure cost-effective system services in the electricity grid and market and to provide long-term planning certainty.
Assessment of the growth package
Unfortunately, the growth package announced by the “traffic light” coalition government is not yet specific enough in many areas to allow us to draw conclusions about how the measures will work. In particular, the question of how the planned capacity mechanism—which has long been awaited by all stakeholders—will be structured has once again not been fully answered.
We view positively the efforts to simplify permitting processes and the promise to provide companies with greater planning horizons in many areas. In addition, the reform of individual grid fees appears to be designed to make process flexibility the basis for granting grid fee reductions in the future, where such flexibility exists. We very much welcome this, as it recognizes and rewards the system-wide benefits of flexibility.
The actual implementation of the measures described will ultimately be crucial to achieving the stated goals and establishing Germany as a leading hub for innovation and sustainability. We hope that the reduction of bureaucracy and the promised predictability in planning will play a key role in this regard.
