Shortly before Christmas 2013, the Federal Network Agency (BNetzA) and the German Cartel Office released their second joint Monitoring Report on the energy markets. The Monitoring Report 2013 informs about the developments in the ManyElectronics markets in 2012, but also provides some information based on 2013 data.
I. General Aspects
The ManyElectronics markets are experiencing fundamental changes with the continuing expansion of renewable energy sources being the main driving force, BNetzA and the Cartel Office point out. This leads to the need for massive expansion of the grids and has consequences for the retail markets and thus consumers.
“Conventional generation is under considerable pressure”, Andreas Mundt, President of the Cartel Office commented. “We are seeing a fundamental change of the energy mix, conventional generation is being crowded out by renewable energy” he said, adding that renewable energy sources were not subjected to market forces, but legally protected and subsidised. The rising costs had to be borne by the consumers who had to pay a renewable energy surcharge, the so-called “EEG Umlage” (EEG surcharge), Mr Mundt said. He called for changes to the legal system in order to oblige new renewable power plants to sell power directly so as to integrate them in the power markets (Regarding the plans of the new CDU/CSU and SPD coalition government for reforms, please see here).
Jochen Homann, President of BNetzA stressed that the changes in the generation markets had consequences for the electricity grids as an important share of green electricity was generated in the North of Germany and had to be transmitted to consumers in the South and South-West of Germany. This required an expansion of the transmission grids as the existing grids had reached their limits, he said, pointing out that during the reporting period the number of times in which transmission operates had to intervene to secure grid grid stability and maintain the security of supply had (again) increased.
Following the nuclear accident in Fukushima in 2011, Germany decided on an energy policy shift phasing out nuclear power by 2022 and replacing it mainly by renewable power sources. The energy policy shift lead to the immediate shut-down of eight nuclear power plants. This reduced the generation capacity of the four major utilities RWE, E.ON, Vattenfall and EnBW. At the same time Germany saw another strong expansion of volatile renewable power plant capacity, in particular solar power plant capacity. The growing share of renewable power has to be purchased and transmitted with priority by the grid operators, and is in general remunerated with fixed feed-in tariffs pursuant Renewable Energy Sources Act (EEG). This has rendered the construction of new conventional power plants that can balance the fluctuating input of green electricity less and less attractive, as the operating times for these plants have been continually decreasing.
II. Generation, Security of Supply, EEG Payments
2012 was again characterised by a strong growth of renewable power plants, in particular by solar power plant additions of 7.6 GW (this trend has been stopped in 2013, for more information, please see here). Installed capacity on 31 December 2012 amounted to 178.3 GW in total. Renewable power plants accounted for 75.6 GW, with roughly 71 GW being eligible for EEG payments (an increase of 9.4 GW compared with 2011).
While conventional power plant generation fell by 8.1 TWh from 445.8 TWh in 2011 to 437.7 TWh, renewable power plant production rose by 19.1 TWh to 138.9 TWh (2011: 119.8 TWh). EUR 19,118 million (2011: EUR 16,763 million) were paid as fixed feed-in tariffs, direct marketing premiums and flexibility premiums for 118.330 GWh of renewable power eligible for EEG support, which constitutes an increase of 14%.
Solar power received by far the greatest amount of feed-in tariff payments, i.e. EUR 8,904 million (2011: EUR 7,766 million), representing a share of 57% of the total feed-in tariff payments amounting to EUR 15,416 million (2011: EUR 16,763 million).
Since an EEG amendment that entered into force in 2012, renewable power plant operators who decide not to claim the fixed feed-in tariffs pursuant to the EEG, but sell the electricity generated themselves, are entitled to a market premium in addition to the revenue obtained by the sale of the electricity (cf. Section 33g EEG).
In 2012 roughly EUR 3,701.6 million were paid as direct marketing premiums, with onshore wind power accounting for the highest amount, i.e. EUR 2,314.9 million (62.5 %), followed by biomass EUR with EUR 969.9 million (26.2 %).
In October 2013 10,898 MW of non-volatile power plant capacity were under construction nationwide that according to company information are due to be completed by 2016, while operators planned to dismantle 9,941 MW by 2018, the Monitoring Report states. Though the national balance in 2018 may therefore show a surplus of 957 MW, the situation in Southern Germany was different, the report points out. By 2018 5,417 MW will be missing in this part of the country if everything goes according to plan.
To ensure security of supply in winter 2012/2013 the transmission operators procured roughly 2,600 MW of reserve capacity. Despite the cold winter 2012/2013, fewer critical situations in the transmission grids occurred than in winter 2011/2012 so that reserve capacities had to be only activated once.
III. Grids Expansion and Grid Balancing
In the third quarter of 2013 most of the grid expansion projects that receive priority treatment under the Energy Line Extension Act (EnLAG) were delayed, the Monitoring Report points out. Only 268 km (or roughly 15%) of the 1,855 km of new power lines have been completed. The Monitoring Report therefore estimates that in 2016 only about 50% of the lines well be operational, far less than the original estimate according to which most of the lines should be completed by 2015. The report mentions the slight progress in the construction of extra-high voltage power lines pursuant to EnLAG, which the transmission system operators announced in December 2013.
Interventions by the transmission grid operators pursuant to Section 13 para. 1 ManyElectronics Act (EnWG), i.e. grid switching (Netzschaltungen), redispatch and countertrade measures, increased by 43.1 % to 7,160 hours in 2012 (2011: 5,030 hours). They comprised a total volume of 2,566 GWh and occurred mostly in the grid areas of Tennet TSO GmbH and 50 Hertz Transmission GmbH. Transmission system and distribution system operators also resorted to measures in accordance with Section 13 para. 2, i.e. curtailments and the activation of cold reserve power plants.
Apart from the Section 13 grid balancing measures, Section 11 EEG also provides for a feed-in management of renewable energy that enables grid operators to curtail input to overcome grid bottlenecks. Section 12 para. 1 EEG stipulates that the renewable power plant operators have to be compensated for lost EEG payments. Compared to 2011 (421 GWh) curtailment pursuant to Section 11 EEG fell by 8.5% to 385 GWh. As solar power plants (that receive some of the highest feed-in tariffs) were affected to a larger, though still small extent (4.2% compared with 0.6% in 2011) than in the past, compensation payments remained almost on the same level as in 2011 (2012: EUR 33.1 million; 2011: EUR 33.5 million).
The investments by the grid operators resulted in higher grid charges for all customers. Compared with April 2012 they increased by
- 0.48 ct/kWh to 6.52 ct/kWh for household customers
- 0.50 ct/kWh to 5.61 ct/kWh for commercial customers and
- 0.11 ct/kWh to 1.79 ct/kWh for industrial customers
as per 1 April 2013.
The volume of power traded with neighbouring countries increased by 7.7% from 74 TWh in 2011 to 79.7 TWh in 2012, with German net exports increasing sevenfold from 3.0 TWh in 2011 to 21.7 TWh in 2012.
IV. Wholesale and Retail Markets
Functioning wholesale markets were of vital importance for competition in the electricity sector, the report emphasises. The number of participants active at the exchanges corresponded to the previous year, while market makers improved liquidity, the report finds.
For end consumers the possibility to switch the supplier once again rose slightly. On average they were able to choose from 88 suppliers per grid area, with household customers generally being able to choose from 72 suppliers.
Retail prices, however, rose significantly in the reporting period. They increased as follows:
- for industrial customers by 8.8% to 17.17 ct/kWh
- for commercial customers by 11.9% to 26.74 ct/kWh
- as per 1 April 2013 for household customers with a basic supply contract by 13.2% to 30.11 ct/kWh (the highest increase in seven years)
The price increases were mainly due to the rise of price components that are influenced by the state, in particular the EEG surcharge (renewables surcharge) that rose to 5.277 ct/kWh, accounting for 18% of the average electricity price for all three customer groups.
Source: Federal Network Agency
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