Source: Energie & Management Powernews, November 16 2022
GE Gas Power presented a recent study by Frontier Economics on November 15 in Berlin. It makes demands on the upcoming reform of the German electricity market design.
New gas-fired power plants must be built quickly, said Markus Becker, head of policy at GE Europe. If wind power and photovoltaics are to supply up to 80 percent of Germany's electricity as early as 2030, he said, a replacement must be ready for times when there is no wind or sun. Estimates for the additional thermal capacity needed by 2030 vary between 14,000 MW and 42,000 MW. But so far, only 3,600 MW of gas-fired power plants are planned or under construction, according to the German Federal Network Agency.
"Too little investment is taking place to provide replacements for the phase-out of nuclear power and coal because of the unclear political, regulatory and economic framework," Becker warned. Against this backdrop, a study by Frontier Economics in cooperation with General Electric (GE) examined conditions for needed investment in sufficient controllable and flexible generation capacity. "Under current market conditions, investments in reserve capacity are very difficult from the investors' point of view," Christoph Gatzen, director of Frontier Economics, stated.
Electricity market must reliably reward services
According to the authors, batteries, demand side management (DSM) and pumped storage would also have to be given a market value in the German electricity market design, in addition to clean, thermal reserve power plant capacity. The study therefore calls for clear participation rules in the future European and German electricity market based on market mechanisms with functioning price signals, the acceptance of price peaks in situations of supply shortage, and a more technology-independent approach based on reliable, clear, and transparent criteria.
Gas-fired power plants could also be operated with renewably produced gases and therefore also have a chance in the climate-neutral future, the authors say. The new electricity market design must provide fair compensation for all services that provide back-up capacity for the electricity system, they said. In addition to power generation, this would include system services and the provision of guaranteed capacity. The new power plants must be given assured access to infrastructure and fuels through streamlined and more streamlined permitting processes, clear green gas certification systems, and pragmatic infrastructure regulation, the study urges.
State help to get started
In building the hydrogen or green gas economy, the state could play a role in coordinating grid expansion and the transportation needs of grid users. In this way, "early movers" could be partially protected from the risk of transport volume or access to fuels. The transparency and liquidity of the current market design must be increased, he said, and the tailoring of electricity price zones must also be stable so that investments that run for 40 years can be recouped. "GE is ready to support the transformation of the German power system and we want our study to contribute to the development of the German power market design," said Martin O'Neill, vice president of strategy for GE Gas Power.
The current energy crisis has triggered a series of debates about the future power market design in Europe and Germany, he said. "Lean and streamlined regulation is needed to ensure that the availability of all needed infrastructure in power and hydrogen generation and transmission is synchronized," Becker called for. Approval and licensing procedures should be clear and fast, he said. In addition, the electricity market design should include adequate investment planning to ensure the expansion of generation capacities.
The study "Achieving generation adequacy within the German power market" is available for download on the Internet.
Author: Susanne Harmsen
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