The Future Perspective of theElectricity Market –Unbundling and Market Integration:A German PerspectiveInternational Sympo...
The German context: EnergiewendeAmbitious and long term targets          GHG      Renewable Energies             Energy ef...
Significant share of renewablesIt’s reality                              Transparency data                              fo...
Power generation from renewablesChallenges & policy approaches      600               Main Challenges               Take-o...
Medium- and long-term challengesfor system & market integration (1)• The recent German support scheme (Feed-in Tariff) was...
Medium- and long-term challengesfor system & market integration (2)• The next phase will require a broader policy approach...
Recent phase of infrastructure integrationbenefited from EU market liberalization• EU market liberalization    First pack...
Rapidly changing structures in theGerman electricity supply system• Starting point    Four major vertically integrated ut...
Experiences from unbundlingThe German case• The German government and significant parts of the German  electricity industr...
Infrastructure planning in GermanyThe recent Network Development Plan            Source: NEP 2012 as of August 2012, www.n...
Power system structuresLessons learned• An ambitious and comprehensive support scheme for  renewables (financing, network ...
Thank you                very muchDr. Felix Chr. MatthesEnergy & Climate DivisionBüro BerlinSchicklerstraße 5-7D-10179 Ber...
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The Future Perspective of the Electricity Market – Unbundling and Market Integration: A German Perspective

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Lecture by Dr. Felix Chr. Matthes at the International Symposium “Towards YR2030 and Beyond”, Japan Renewable Energy Foundation (JREF). Tokyo, 6 September 2012

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The Future Perspective of the Electricity Market – Unbundling and Market Integration: A German Perspective

  1. 1. The Future Perspective of theElectricity Market –Unbundling and Market Integration:A German PerspectiveInternational Symposium“Towards YR2030 and Beyond”Japan Renewable Energy Foundation (JREF)Dr. Felix Chr. MatthesTokyo, 6 September 2012
  2. 2. The German context: EnergiewendeAmbitious and long term targets GHG Renewable Energies Energy efficiency Nuclear emissions Gross final Power Primary Space Final Power power consump- generation energy heating Energy consump- tion tion 2011 -41% 2015 -47% 2917 -54% 2019 -60% 2020 -40% 18% 35% -20% -20% -10% -10% 2021 -80% 2022 -100% 2030 -55% 30% 50% 2040 -70% 45% 65% -80 to 2050 60% 80% -50% -80% -40% -25% -95% Base 1990 2008 2008 2005 2008 2010 year Source: BReg (2010/2011)
  3. 3. Significant share of renewablesIt’s reality Transparency data for power generation Day ahead prognosis 6 September 2012 •A sunny, low-wind day •Renewables share at noon ~ 40% Source: EEX Transparency Platform
  4. 4. Power generation from renewablesChallenges & policy approaches 600 Main Challenges Take-off, technology, cost cuttings System & market integration Storage System services European Integration 500 Main policies Financial support scheme (FiT) Market design (conventional & renewables & storage) Obligation for network connection Enabling framework for massive infrastructure roll-out (T & D & S) Priority network access European convergence 400 National targetsTWh 300 Historical data Binding target (EU) Geothermal Waste (biogenic) 200 Landfill gas Biomass Photovoltaics 100 Wind - offshore Wind - onshore Hydro 0 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 Source: BReg (2012), Öko-Institut (2012)
  5. 5. Medium- and long-term challengesfor system & market integration (1)• The recent German support scheme (Feed-in Tariff) was the key policy for the take-off phase  Fixed and long-term feed-in tariffs, based on costs  Obligation for connection to the (existing) network  Priority access to the network and the market• The next phase will require a broader policy approach  Today’s liberalized (EU) electricity (energy only) market creates neither a solid basis for integration of renewables nor a sufficient economic framework for the necessary conventional investments • Price formation based on short-term marginal costs (~0 for wind & solar) • No long-term contracts • No capacity markets/payments  Market integration of renewables requires a reform of todays power markets and a (stepwise) reform of the support scheme
  6. 6. Medium- and long-term challengesfor system & market integration (2)• The next phase will require a broader policy approach (ctnd)  Significant shares of renewables require new approaches to infrastructure design, operations & development • Massive upgrading of transmission and distribution networks is necessary (= significant investments) • Unbiased network operators  In planning processes  With regard to the necessary (long-term) investments  Within network operations (access, system services etc.) • Independent regulators with a clear mandate  Creating an enabling framework  Avoiding abuse of market power from infrastructure monopolies• This presentation is about infrastructure integration only. However, market integration is another challenging issue
  7. 7. Recent phase of infrastructure integrationbenefited from EU market liberalization• EU market liberalization  First package (1996): opening national markets • Networks: legal, functional and accounting unbundling for TSOs and DSOs (>100,000 customers)  Second package (2003): further opening of national markets, regulation of cross-border trades • Networks: legal, functional and accounting unbundling of TSOs and DSOs (>100,000 customers)  Third package (2009): development of regional/European markets, institutions for European co-operation, European guidelines and network codes • Transmission Networks: ownership unbundling for TSOs or Independent System/Transmission Operator (ISO/ITO) • Distribution networks: legal, functional and accounting unbundling for DSOs (>100,000 customers) • High-standard medium-term network planning
  8. 8. Rapidly changing structures in theGerman electricity supply system• Starting point  Four major vertically integrated utilities (generation, transmission, distribution, sales): RWE, E.ON, Vattenfall, EnBW  Regional & municipal vertically integrated utilities• Recent status  Four major unbundled utilities • Separate entities for generation and sales • Unbundled transmission system  Full ownership unbundling: 50 Hertz (formerly Vattenfall), TenneT (formerly E.ON)  Partly ownership unbundling: Amprion (formerly RWE which still owns 25%)  No ownership unbundling: Transnet BW (formerly EnBW which still owns 100%)  Regional & municipal utilities, the larger ones legally unbundled
  9. 9. Experiences from unbundlingThe German case• The German government and significant parts of the German electricity industry opposed all mandatory unbundling provisions when the respective EU legislative proposals were discussed• Ironically, German utilities often went beyond the minimum requirements for unbundling, after these has been approved• What has changed since further steps of unbundling were implemented?  Much more unbiased activities, network companies are a more accepted and reliable partner for policy  Significantly more investments in network infrastructure  Network companies became a key player on medium- and long- term infrastructure planning with broad and intensive consultations of assumptions, methodologies and results• However, this results from the structure of the network companies as well as a (new) effective regulatory body
  10. 10. Infrastructure planning in GermanyThe recent Network Development Plan Source: NEP 2012 as of August 2012, www.netzentwicklungsplan.de
  11. 11. Power system structuresLessons learned• An ambitious and comprehensive support scheme for renewables (financing, network connection, dispatch) as primary instrument is key for the take-off phase• Beyond the take-off phase broader approaches are essential  More complex financing for renewables is essential to optimize investments and operations  Creating market structures which are more appropriate  Creating an infrastructure industry (transmission and distribution) • which is supportive for infrastructure upgrades and roll-out • which has an self-interest in infrastructure investments and the ability for implementation of these investments • Far-reaching (ownership) unbundling has been effective  Creating an effective regulatory body • Effective oversight on infrastructure monopolies • Effective planning for major infrastructure upgrades & roll-out
  12. 12. Thank you very muchDr. Felix Chr. MatthesEnergy & Climate DivisionBüro BerlinSchicklerstraße 5-7D-10179 Berlinf.matthes@oeko.dewww.oeko.de

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