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Power market reform: Germany adapt to more renewables

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The German government is preparing for the future. The new document on a “Power Market 2.0” is interesting also in a Chinese context.

The German government has recently launched a “white paper” on the future electricity market in Germany. The paper is the latest result of the German “Energiewende” process and it set out guidelines for a power market which can promote and integrate variable power production from wind and solar.

One of the key questions for power systems with a high share of renewable energy is how to ensure sufficient power power capacity to meet the demand at all times. The German answer to this is, that the power market should be able to do this. Therefore, the idea of a special market for capacity is rejected, because this would distort the energy market. Instead Germany will establish a capacity reserve, which will not participate in the energy market. The power plants in the capacity reserve will normally not produce but only be available as a back-up guarantee for the market based incentives for ensuring sufficient capacity. The power plants will mainly consist of old coal fired units, and because they will only be kept as reserve, they will not add to the pollution or distort the energy market.

State Secretary Rainer Baake from the Federal Ministry for Economic Affairs and Energy says in the Ministry’s newsletter: “The electricity market 2.0 ensures security of supply, is cheaper than a capacity market, creates incentives for innovation and permits high proportions of renewable energy to be integrated. It also fits into the European internal market.”

In China the power market reform is now been prepared and clearly some of the main concerns for the future power system are very similar when comparing China and Europe. It would therefore be relevant to study the German and North European considerations carefully to avoid some of the pitfalls which could block for further RE deployment and integration.

Read more about the German reform process here, including a link to the white paper (currently only in German). See also more about the German reform process and the German “Electricity Market Platform”