Thursday, September 29, 2011

Europe Continues to Debate Market Mechanisms To Cope with Changing Supply Mix

EFET Demands Strengthening of Market-Related Mechanisms Instead of Capacity Markets « German Energy Blog:

EFET, however, speaks out against expanding the EEG mechanisms to the generation of conventional energy, warning of an increasingly planned energy market with rising costs and decreasing efficiency. Free markets were best suited to ensure that the necessary investments were made with the lowest costs to the overall economy, EFET says. The association therefore proposes to strengthen the liberal market design, not only in Germany, but also on the European level. This included a centralised organisation of the market for operating reserve and an improved market integration of renewable energy sources, EFET says. In addition the organisation demands that electricity grids are speedily expanded.
In its recent report “Competition in the Gas and Electricity Markets”, the Monopolies Commission (Monopolkommission) advised to use the opportunity the nuclear exit provided for a comprehensive change of the German energy landscape. This might include capacity markets, the commission said.
2 points here:
- the data doesn't support that a broader geographic area will compensate for weak, and strong, wind and solar periods. The EFET argument is helpful in terms of a broader market allowing for lower overall operating reserves, but that improvement would just, temporarily, mask the need for capacity payments in a world where renewables are provided preferential access to markets while remaining intermittently available.

- similarly, the elimination of baseload, via the nuclear exit in Germany, just masks the very same issue a little longer.

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