BDEW: Germany needs a capacity market to ensure security of supply

The German Association of Energy and Water Industries (BDEW) has put forward a proposal for a new design for Germany’s electricity market. At its core is a new capacity mechanism intended to ensure security of supply.

“The current market design prevents supply interruptions, but does not guarantee that we can achieve the triad of renewable energy, affordability and security of supply. That is why additional instruments are needed,” said BDEW chief executive Kerstin Andreae.

BDEW proposes establishing a capacity market that would cover residual load in the future system—that is, the load remaining after generation from renewable energy sources such as wind and solar power has been deducted.

The market should be open, for example, to climate-friendly conventional power plants, such as gas-fired plants ready to burn hydrogen; facilities using renewable energy sources; electricity storage facilities; and electricity imports. BDEW says all these resources must ensure that the relevant investments contribute to meeting the climate targets for 2030 and 2045.

“Given the many uncertainties, the federal government should urgently clarify how security of supply is to be ensured in the medium and long term,” Andreae added.

The German government should address the incentives needed to build new hydrogen-ready power plants in the short term during this legislative period, and develop a systematic approach to a capacity market over the medium to long term, the association said.

According to BDEW, the conditions needed to build resources that would ensure security of electricity supply by 2030 are not yet in place.

Germany, which aims to meet 80% of its electricity consumption from renewable energy sources by 2030, is planning to reform its electricity market. In February, the government launched a platform for exchanging views among companies, researchers and citizens, which is intended to lay the groundwork for preparing the German electricity market for greater reliance on renewable energy sources. The platform’s initial findings are expected to be presented in a summer report.