UBA research studies point out ways for efficient integration of renewable energy into the electricity market

Electricity Market 2.0 is more cost-effective than capacity markets. Flexibilization of production and consumption will improve the integration of renewable energy.

wind energy plants and open power supply lineClick to enlarge
The electricity market must be able to adapt to fluctuations in yield from wind and solar energy.
Source: Thorsten Schier / Fotolia.com

Two new research studies completed on behalf of the German Environment Agency (UBA) show how the electricity market can master the challenges from further developing renewable energy. Their conclusion: the main approach should aim to optimize the existing electricity wholesale market, also known as Electricity Market 2.0. The introduction of capacity markets, which means additional markets on which power station operators receive payments for making capacities available, is not necessary and would incur unnecessary costs. Centralized capacity markets in particular would complicate the integration of renewable energy. To meet the call for the security of supply a capacity reserve should be added to the optimized electricity market.

The studies confirm the approach taken by the Electricity Market Act to optimize the existing electricity market and they provide ideas for further steps towards an Electricity Market 2.0. The draft legislation of the Electricity Market Act which the Federal Cabinet adopted in late 2015 aims at readying the existing electricity market for the further development of renewable energy. Renewable energies are the key to the energy transition (Energiewende) and will change the requirements and conditions of all the players on the electricity market.

Fluctuating renewable energy will require, in addition to the expansion of the grid, a flexibilization of production and consumption. There are many technological possibilities to achieve this nowadays, for example by improving partial load capacity and more flexible use of power generation plants, the use of emergency power systems, use of storage technologies, and more flexible demand from consumers (demand side management). It is the responsibility of the electricity market to develop the most cost-effective flexibility options through open technology competition. The analysis of current regulations in select areas – in particular the scheme of grid charges, configuration of the market and product designs of the control power markets, as well as the configuration of the balancing group and balancing energy system – identify existing inflexibilities and point out adjustments to the electricity market design which are useful over the short and medium term. For example, the tendering process for control power should make provisions for shortening product periods and lead times, and special grid charges can be adjusted to make it easier to apply demand side management. The studies point out that despite the many improvements in recent years, there is still a need for further adjustment on the road to Electricity Market 2.0. The Green Paper and the White Paper published by the Federal Ministry for Economic Affairs and Energy took these factors into account to the extent possible as did the draft legislation on the reform of the electricity market.

The research studies Strommarktdesign der Zukunft and Strommarkt und Klimaschutz were carried out by r2b energy consulting on behalf of the German Environment Agency.

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