According to the country’s energy business, the design of Germany’s electricity market requires a fundamental revamp more urgently than it ever has previously in order to make the economic worth of supply security obvious. In addition to money from energy generation, the industry demanded the establishment of a new revenue stream for power plants that are available to provide electricity whenever it is required, as part of a stakeholder study that also involved think tanks and labor unions.
The current energy-only market (EOM), in which the only compensation for owners of power plants is the price per kilowatt hour produced, is “increasingly revealing deficits when it comes to ensuring security of supply with electricity,” the group writes, because simply being available does not guarantee compensation. According to a joint press release by energy industry associations, energy providers, and grid operators, it “does not provide sufficient incentives for investments,” particularly in photovoltaic (PV) and wind power plants, whose permanent refinancing must be secured to match the risk profile of potential investors, and have a lasting dampening effect on prices.
Additionally, it “does not provide sufficient incentives for investments” in nuclear power plants, which “does not provide sufficient incentives for investments.” According to those in the business, investments in less expensive generation technologies cannot, on their own, ensure sufficient supply security during times when there is insufficient sun and wind. Because of this, there is a need for economic incentives for investments in controlled capabilities, particularly those that can be run with climate-neutral fuels like hydrogen or biomass. These types of capacities are particularly important. Plants that generate electricity regardless of the weather conditions help ensure the reliability of the power supply at a time when the percentage of renewable energy in the system is growing.
According to the statement made by the group, availability is “rapidly approaching the status of’reserve currency’ on the power market.” According to the findings of the panel, “Market incentives must to be introduced for the purpose of creating extra flexibility on both the supply and the demand side.” In order to achieve its goal of having a system that is climate-neutral, cheap, and secure, Germany has set a goal to satisfy 80 percent of its power demands with supplies from renewable sources by the year 2030, and then to fulfill all of its needs with such supplies by the year 2035. Many detractors of Germany’s energy-only market model have maintained for a long time that it is difficult to find investors for peak load plants that may only operate for a few hours each year. They frequently advocate for something known as a capacity market as a means of ensuring that there will always be enough supplies.