Electricity and Gas Monitoring Report 2014: Energy Transformation in Electricity Generation Sector Well Underway, Grid Expansion Lags Behind

The 2014 Monitoring Report on the energy markets published by Federal Network Agency (BNetzA) and the German Cartel Office shows that the energy transformation was well underway in the power generation sector in 2013. Renewable power production again increased, but so did coal-fired power production. Grid expansion was, however, still lagging behind. The number of times in which transmission operates had to intervene to secure grid stability and maintain the security of supply rose once again In the electricity markets competition further improved. Yet electricity prices for household consumers are the second-highest in Europe.

Below we outline key aspects of the report.

I. Electricity Markets

1. Generation

  • Further growth of renewable power plant capacity by 6.7 GW (solar: 3.3 GW, onshore wind power: 2.9 GW) to 83.1 GW;
  • Conventional power plant capacity growth of 1.6 GW (total: 105 GW);
  • Installed generation capacity in total on 31 December 2013: 188.1 GW;
  • Net conventional power production increased by 5.4 TWh (+ 1.2%) to 444.5 TWh in 2013; lignite production increased by 7.2 TWh (+ 5.1%), hard coal by 6 TWh (5.6%), while natural gas and nuclear power production fell by 8.3 TWh (-12.4%) respectively 2.1 TWh (-2.2%), (regarding efforts by the government to make conventional power plants save more CO2, please see here);
  • Market share of four biggest utilities (E.ON, RWE, EnBW and Vattenfall) down 6% (compared with 2010) to 67%, (regarding E.ON’s recent announcement of a restructuring plan, please see here);
  • Generation overcapacities in Germany and Europe;
  • Net renewable power production rose by 8.2 TWh (+5.9%) to 146.3 TWh. The largest growth occured in the solar sector: 3.5 TWh (+13.3%);
  • Net power production from conventional and renewable sources increased by 13.6 TWh (+2.4%) to 590.8 TWh in 2013;
  • Total capacity of renewable power plants eligible for support under the Renewable Energy Sources Act (EEG) rose by 6.7 GW to 78.4 GW (31 December 2012: 71.7 GW);
  • 125,693 GWh of green power received payments under the EEG totalling EUR 19.637 million, an increase of 2.7%.

2. Security of Supply

  • The security of supply in the electricity sector remained on a high level (for more information, please see here);
  • System disruptions per connected end customer measured according to the System Average Interruption Duration Index (SAIDI) fell from 15.91 minutes in 2012 to 15.32 minutes in 2013;
  • In winter 2012/2013 reserve power plants did not have to be activated; For winter 2014/2015 BNetzA identified a need for reserve power plant capacity in the amount of 3.1 GW. 2.2 GW will be provided by German power plants. To this end BNetzA declared plants in with a total capacity of 1,660.4 MW located in Southern Germany that were notified for decommissioning system-relevant in the sense of Section 13a para. 2 Germany Energy Act (EnWG) and the accompanying ordinance (ResKV). 0.9 GW of the reserve capacity will be provided by Austrian plants;
  • Redispatch measures by the TSOs to secure supply in the sense of Section 13 para. 1 occurred on 232 days in 2013, mostly in the grid areas of Tennet TSO GmbH and 50 Hertz Transmission GmbH. They increased by 11% to 7,965 hours (2012: 7,160 hours). The measures had a total volume of 4,390 GWh. Reimbursements made by the TSOs amounted to EUR 132.6 million.
  • In 2013 TSOs did not resort to measures in accordance with Section 13 para. 2, i.e. curtailments, yet distribution system operators did on 346 days for 4.393 hours. For the main part renewable power plants were affected;
  • Apart from the Section 13 grid balancing measures, Section 11 (EEG 2012) also provided for a feed-in management of renewable energy that enabled grid operators to curtail input to overcome grid bottlenecks (the EEG 2014 also contains this possibility, see Section 14). Section 12 para. 1 EEG stipulated that the renewable power plant operators have to be compensated for lost EEG payments. Compared to 2012 (385 GWh) curtailments pursuant to Section 11 EEG were up 44%. Compensation payments rose to EUR 44.7 million (2012: EUR 33.1 million).
  • The volume of power traded with neighbouring countries rose once again by 8.4% from 79.7 TWh in 2012 to 86.4 TWh in 2013, with German net exports increasing from 21.7 TWh in 2012 to 32.5 TWh in 2013 (2011: 3.0 TWh).

2. Grid Expansion and Grid Balancing

  • In the third quarter of 2014 23% of the grid expansion projects that receive priority treatment under the Energy Line Extension Act (EnLAG) were completed (438 of 1,887 km);
  • According to the TSOs, about 40% of the EnLAG power lines shall be completed by 2016. None of the underground cable pilot projects has been commissioned yet; Initially the majority of the EnLAG projects should have been completed by 2015;
  • Further grid projects are contained in the Onshore Grid Development Plan and the Offshore Grid Development Plan 2013, which BNetzA recently confirmed. The onshore plan comprises new power lines with a length of 2,650 km and optimisation and enhancement measures concerning 2,800 km. BNetzA recently received the first application for a new extra-high voltage line.

3. Competition on Electricity Markets

  • The market share of the four biggest utilities in the generation sector fell to 67%;
  • High liquidity on wholesale markets;
  • The number of suppliers final consumers can choose from rose again, household customers have on average of 80 suppliers;
  • The number of industrial and commercial consumers who changed their supplier remained approximately on the 2006 level (12%);
  • The number of household consumers who changed their supplier rose from 3.2 million to 3.6 million;
  • The amendment of the Renewable Energy Sources Act (EEG) lead to more market elements, in particular the obligation for new plants to sell green electricity directly instead of claiming feed-in tariffs (for more information on the EEG 2014, please see here), yet the amendment should have introduced more market elements, the Cartel Office says, warning to create a capacity market that remunerates non-volatile, flexible power (often conventional power) that helps to balance the growing amount of renewable energy fed into the grid.

4. Electricity Prices

  • Electricity Prices for industrial and commercial consumers remained largely on the same level as in 2012 despite a strong increase of the renewable energy surcharge (EEG Umlage);
  • Industrial consumers paid on average 15 ct/kWh, 10.5 ct/kWh of which were surcharges, taxes, grid charges and other duties;
  • The average price for industrial consumers is above the European average; consumers who were eligible for reductions of the EEG surcharge, taxes etc. had to pay an electricity price below the European average;
  • Commercial consumers with a consumption of 50 MWh paid on average 22 ct/kWh, roughly the same level as last year;
  • The price increase for household consumers seen in the last years slowed down;
  • A household consumers with a basic supply contract (Grundversorgung) and a consumption of 3,500 kWh had to pay on average 30.50 ct/kWh (including VAT). This constitutes an increase of 1.3%. Price elements like taxes and surcharges influenced by the authorities meanwhile account for 73%. Prices for household consumers are the second-highest in Europe.

II. Gas Markets

  • About 10% of the gas demand in Germany can be supplied by indigenous gas;
  • In 2013 domestic gas production declined by 1 billion m3 (9.3%) to 9.7 m3;
  • Natural gas imports rose by 18.8% from 1,535 TWh in 2012 to 1,778 TWh;
  • Exports also rose from 667.3 TWh in 2012 to 725.8 TWh, showing the importance of Germany as a transit country;
  • The security of supply in the gas sector was again high in 2013 (for more information, please see here);
  • Security of supply improved as a new gas storage facility started operations;
  • At the beginning of November 2014 gas storage sites were filled almost to their maximum (97 %).

Source: Federal Network Agency

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