Germany Lays a New Foundation for Electricity Market

German-Economy-and-Energy-Minister-Sigma

The cabinet of Angela Merkel’s ruling coalition has endorsed changes to the German electricity market, ensuring their passage into law.

“This is the largest reform of the electricity market since the energy markets were liberalised in the 1990s, and it will make the electricity market fit for the 21st century,” said Energy Minister Sigmar Gabriel.

The law, dubbed “Electricity Market 2.0,” relies on market mechanisms to foster competition between electricity generation and flexibility options, rejecting generator proposals for an American-style capacity market. It requires greater accountability from “balancing responsible parties,” brokers who ensure that the energy needed by their clients is actually available. And it creates two pools of extra capacity—including a controversial early retirement bonus for lignite power plants.

“This will enable the future electricity market to deliver security of supply in the face of growing shares of renewable energy,” the ministry reported, announcing the agreement on November 4. Germany has a goal of 80% renewable electricity by 2050.

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