2nd BMWi Power Plant Forum Debates New EWI Study on Design of Electricity Markets to Ensure Sufficient Power Plant Capacity

A couple of interesting articles have been posted at the German Energy Blog - well, interesting if you are following market design challenges for markets where intermittent, unpredictable generators are given priority access to the grid.

2nd BMWi Power Plant Forum Debates New EWI Study on Design of Electricity Markets to Ensure Sufficient Power Plant Capacity « German Energy Blog:

"The study shows the dilemma of the German electricity market design. The priority for renewable energy with regard to the guaranteed purchase, transmission and remuneration (fixed feed-in tariffs) pursuant to the more and more complex Renewable Energy Energy Sources Act (EEG; see latest plans for a solar feed-in tariff reduction despite the amendment of EEG at the beginning of 2012) leads to less and less load hours for power plants that are (still) needed to provide security of supply, i.e. mostly conventional power plants. In return some kind of new market design for a secure supply of energy seems almost inevitable, but can itself potentially distort the market or at least render the whole market design even more complex and less transparent. This may lead to new market entry barriers."

Read the entire article at The German Energy Blog
The article is directly related to the planned build-out of traditional (coal/gas) build-out in Germany, which is described in a second German Energy Blog post; BDEW Data on Power Plant New Build and Electricity Consumption.



In my opinion, it looks like they are getting the voyage wrong in that the starting point, a free and open market, is forgotten.


The intermittent supply should create very low (including negative) and very high pricing.  Whatever capacity instrument they use, it should not attempt to prevent that, but only aim to keep the lights on.


Capacity markets are designed to build coal and gas plants - the strategic reserve model could be designed to encourage the market to avoid using reserve coal (and maybe gas) plants.  The design could encourage market participants to avoid the need for the reserve to be utilized.