French Capacity Market: BDEW Calls for Open Discussion on German Capacity Market Mechanism

The publication of key points for the introduction of a capacity market in France lead to Hildegard Müller, chairwoman of the energy trade association BDEW, calling for an open discussion of a German capacity market for energy that ensures the security of supply.

Great Britain had also decided in favour of setting up a capacity market and a dozen other European countries were discussing the topic, which showed that a reform of the electricity market design was not a national, but a European challenge, Mrs Müller pointed out. Hence, it was important that the German discussion was open with regard to the outcome and would be conducted with a European, cross-border approach. Mrs Müller emphasised that the BDEW proposal for a capacity market supported and promoted the European internal energy market.

In a capacity market reliable sources of capacity receive payment alongside their electricity revenues to ensure that they deliver energy whenever needed if other sources, in particular the growing amount of intermittent renewable energy sources, do not deliver enough energy to satisfy demand.

In late November 2014 Vice-Chancellor and Energy Minister Sigmar Gabriel had rejected the idea of having a capacity market for the time being. His ministry had published a Green Paper on the future development of the German electricity market in October 2014, which has been put up for consultation. Comments are due by 1 March 2015. The Green Paper shall be followed up by a White Paper with specific proposals at the end of May 2015.

Whether the discussion on a German capacity market was open with regard to the outcome, has been questioned by market participants. At a recent energy conference, Rainer Baake, Secretary of State in the Federal Ministry of Economics, an influential aide to Minister of Economics, Sigmar Gabriel, rejected this view. Yet he said that the ministry would not adopt any model just for the purpose of subsidizing unprofitable thermal power plants.

The French proposal for a capacity market contains various measures to ensure sufficient generation at all times and reduce consumption so as to avoid shortages. Only in the event that these measures are not enough a remuneration shall be paid for additional production or reducing consumption further. The French Energy Ministry also points out that the capacity market mechanism is only one tool among others, naming inter alia the development of power storage.

Source: BDEW

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