Liberalisation of the electricity market

Germany is a pioneer in the EU where the liberalisation of the electricity market is concerned. The diversity of market players and the use of dynamic trading and prognosis procedures allows for a liquid wholesale market.

This is crucial for driving the energy transition forward. In July 2016, the Electricity Market Act was passed.

Statistics & facts

200
TWh
Trade volume on the futures market for electricity in the year 2002
2537
TWh
Trade volume on the futures market for electricity in the year 2015
52 %
Taxes,
reallocation charges, and fees as a percentage of electricity costs for household customers
49 %
Decline
in wholesale prices for electricity on the futures market between 2010 and 2016
Developing the electricity market

Based on liberalisation

Compared with other parts of the EU, the German electricity market is largely liberalised. The variety of stakeholders and the use of dynamic trading and forecast systems permit profitable and efficient wholesale.

The liberalisation of  the electricity supply and the creation of a Single European Electricity Market have been the target of advancement efforts since the end of the 90s. This also includes the "unbundling" of market players, i.e. separating the generation, transportation, and sale of electricity.

Liberalisation allows for flexible reactions 

Market mechanisms and the high dynamism of wholesale transactions play a central role in the success of the energy transition. Before liberalisation, the electricity market was dominated by rigid planning models and just a few participants. Thanks to sophisticated, agile prognosis and trade procedures and the new diversity of players, it is now possible to e.g. react flexibly and efficiently to the volatile generation of electricity from renewable energy sources. This is also made possible in part by the ability to make electricity trades on the stock market that are accurate down to fifteen minute blocks. In this case, the short lead times make prognoses highly precise, such that supply and demand can be balanced out in a highly accurate fashion (intraday trading).

Liberalisation with a large number of players also leads to increased market liquidity. This means that the market volume is sufficiently large, and there is brisk trading activity. In this manner, electricity can be traded without individual transactions having a significant effect on the market price. At the same time, the security of supply in Germany continues to be very high. For example, the SAIDI index (average outage duration) from 2006 to 2014 fell by 57 percent, despite the fact that renewable energy in Germany saw significant expansion during the same period.

Trade prices on energy exchange at record low

The improved competition on the electricity market, the expansion of the European Single Market, and the increase in the amount of renewable energy being fed into the grid is also reflected in the wholesale prices. They are currently lower than ever before. End customers only benefit partially from this development, as their electricity prices have increased due to numerous fees for final consumers. In Germany, apart from the EEG (Renewable Energy Sources Act) reallocation charge, this also includes CHP surcharges (combined heat and power generation), the §19 StromNEV reallocation charge (electricity grid user charges), offshore liability reallocation charges, reallocation charges for interruptible loads, concession fees, and electricity tax.

Consistent further development of the electricity market

In order to ensure a reliable, cost-effective, and environmentally friendly supply of electricity as part of the energy transition, both electricity market design as well as trade products and market players need to develop or be developed in a consistent fashion. The goal is to design the market so that the increasing percentage of renewable electricity is optimally integrated into the energy mix, and provide incentives for the required flexibility for equalising the fluctuating feeding-in of renewable energy.

A valuable commodity in the future: Flexibility

Due to the major significance of flexibility in electricity generation and electricity consumption in the future, dena expects that the differentiation of the markets for increased flexibility will be an important future development. Hence, dena is actively involved in various fields with an eye on technological development, influencing strategic regulatory decisions, and future business models. Among other things, this also includes demand side management and Grid expansion.

Additional information:

Statement on a draft bill for a law on the further development of the electricity market (Electricity Market Act)