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August 25, 2015

German energy market reforms contradict EU guidelines, says DNV GL

Norway-based risk management authority DNV GL has indicated that the German Federal Ministry for Economic Affairs and Energy's proposal to introduce an Energy-Only Market in the country supported by a capacity reserve, contradicts European Union guidelines.

Energy advisory DNV GL has indicated that the German Federal Ministry for Economic Affairs and Energy’s proposal to introduce an Energy-Only Market in the country supported by a capacity reserve, contradicts European Union guidelines.

Commenting on the public white book consultation process the advisory said that ‘An Electricity Market for the Energy Transition’, and has submitted its comments for the consultation phase. Introduction of the capacity reserve is an integral part of the green paper.

DNV GL supports the German ministry’s plans to develop a strengthened European co-operation for a secure power supply; however, it has indicated the existence of fundamental discrepancies between the proposed form of capacity reserve and the European guidelines for the introduction of capacity mechanisms.

"There is considerable doubt that the development of a capacity reserve as stated in the white paper will meet the requirements of the European guidelines."

DNV GL Central Europe and Mediterranean Energy Advisory managing director and executive vice-president Dr Andreas Schröter said: "In our opinion, there is considerable doubt that the development of a capacity reserve as stated in the white paper will meet the requirements of the European guidelines.

"The goal of a new electricity market design, which would provide for security of supply whilst taking into consideration the guidelines for the European electricity market as the European Commission sees it, is not guaranteed under measures which have been proposed the Ministry Federal Ministry for Economic Affairs and Energy."

The ‘Guidelines on State Aid for Environmental Protection and Energy 2014-2020’ specified by EU Commission vouch for technological neutrality, which may be contradicted by the German proposal for reintroduction of brown coal-fired power stations to the capacity reserve.

The European guidelines also favour Europe-wide invitation, but foreign contributions for the proposed German capacity reserve are not explicitly addressed in the white paper.

Considerable difference has also been noticed regarding a mutual understanding between Germany and its ‘electrical neighbours’ regarding ‘security of supply’, especially during extreme rise in power costs.

DNV GL has proposed regional co-operation during such periods to ensure a reliable power supply.

DNV GL Department of Market and Policy Development head Claas Hülsen said: "In DNV GL’s opinion, the aspiration should be to introduce unified standards and frameworks for the design of the electricity market, in order to achieve fair conditions of competition within the European electricity trade.

"Because of increasing interconnection in the European electricity market, common standards are necessary in order to prevent any [real or perceived] free-riding behaviour and to avoid spikes in ‘export’ prices."

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