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Germany adopts major electricity market reform, must wait for EU approval

Staff writer |
The Bundestag has adopted the Acts on the Further Development of the Electricity Market and on the Digitisation of the Energy Transition.

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The Electricity Market Act includes the decommissioning of 13% of the lignite-based capacities.

Following the decision by the Bundestag, the Bundesrat will discuss the legislation, which is not subject to its approval. Once that has taken place, authorisation from the European Commission under state aid rules is required.

Federal Minister Sigmar Gabriel said: "This is the biggest reform of the electricity market since the liberalisation of the 1990s.

"This reform will make the electricity market fit for the growing shares of renewable energy. Germany's power supply will remain cheap and reliable, even as the market is driven by increasing amounts of wind and solar power. The Act puts the rules in place for competition between flexible supply, flexible demand, and storage.

"We are making sure that the electricity traders live up to their responsibilities: those who sell electricity must purchase an identical quantity and feed it into the grid at the same time, so that the supply will be secure at all times. Free price formation on the wholesale electricity market will ensure that investment takes place in the required capacities.

"The level of capacity maintained will be that demanded by the customers - no more, but also no less.

The Act on the Digitisation of the Energy Transition gives the electricity sector a pioneering role, since it creates the possibility for new, innovative business models, e.g. by linking up renewable power generation with the consumers.

"The main thrust of the Act is the introduction of smart meters. They will provide a secure communication platform which will make the electricity supply system fit for the energy transition. Finally, the placing of 13% of lignite-fired capacities on 'security stand-by' with subsequent decommissioning will help us to meet our climate targets in the electricity sector by 2020."

The Act on the Further Development of the Electricity Market marks the culmination of a process which started with a 'Green Paper' and a 'White Paper'. After in-depth consultations with the public and coordination meetings with Germany's neighbours, the German government decided in favour of an Electricity Market 2.0 with free pricing on the wholesale markets, and against a 'capacity market'.

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