Agora CP Germany Web PDF

Report on the
German power system

Version 1.01
country profile
Report on the German
power system
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country Profile
Report on the German power system
WRITTEN BY
Edith Bayer
The Regulatory Assistance Project
Rue de la Science 23
1040 Brussels
Belgium
ON BEHALF OF
Agora Energiewende
Rosenstrasse 2 | 10178 Berlin | Germany
Project lead:
Markus Steigenberger
markus.steigenberger@agora-energiewende.de
Editor:
Mara Marthe Kleiner
Typesetting:
Maren Rabe, www.marenrabe.com
Cover:
Own illustration
057/03-CP-2014/EN Please quote as:

Version 1.01 RAP (2015): Report on the German power system. Version
Published February 2015 1.0. Study commissioned by Agora Energiewende.
Preface
Dear reader, profiles were supposed to serve internal purposes only.

But, as we believe this information could be valuable for
A glance at a map reveals a simple truth: Geographically others as well, we decided to publish it and make it ac-
speaking, Germany lies in the heart of Europe. Knowing that cessible to everyone.
annual electricity demand in Germany is the highest in Eu-
rope, its generation fleet the largest, and its power system in- This country report on Germany is the third in our series. It
terconnected with ten countries with a total transfer capac- reflects the status quo of late 2014.
ity of more than 20 GW, one may wonder how anyone could
claim that the Energiewende is purely a national endeavour. It is certainly not exhaustive. And we are well aware that
The opposite is true: German and European energy systems things are changing very rapidly especially in Germany
are heavily intertwined. Whatever happens in Germany has in these days. Hence, we rather consider this report as work
effects on its neighbours and vice versa. It is widely accepted in progress that we will be reviewing on a regular basis. We
that enhancing cooperation among European partners would would thus invite everyone to send us comments and cor-
create positive welfare effects for all. Sharing resources and rections that could be incorporated into the next versions to
developing joint regulatory frameworks could, for instance, countryprofile@agoraenergiewende.de.
help achieving system reliability at lower costs and balance
variable power generation across Europe. May this country profile be helpful for your work!
As cooperation starts with mutual understanding, Agora Dr. Patrick Graichen

Energiewende asked the Regulatory Assistance Project Executive Director of Agora Energiewende
(RAP) to develop a set of short and readable reports on
the power sectors of Germanys neighbouring countries, Markus Steigenberger
focusing on key features, regulatory frameworks and im- Head of European Energy Cooperation
portant political developments. Originally, the country of Agora Energiewende
1
2
Content
1 Overview 5
2 Industry Structure, Ownership and Regulation 7

2.1 Industry Structure 7
2.2 Regulation 10
2.3 Transposition of European Energy Policy 11
3 Energy Production and Consumption 13

3.1 Installed Capacity 13
3.2 Production 13
3.3 Consumption 14
3.4 Peak Demand 15
3.5 Planned Conventional Power Plants 15
4 Imports and Exports 17
5 Electricity Market 21
5.1 Wholesale Market, Prices, Liquidity 21
5.1.1 Electricity Market Design 21
5.1.2 Market Liquidity 21
5.2 Retail Market 22
5.2.1 Breakdown of Electricity Bill 23
5.3 Grid Cost Allocation 25
6 Electricity Balancing/Reserve Markets 27
7 Decarbonisation Policies and German Energiewende 29
8 Renewable Energy 31
9 Energy Efficiency 33
10 Grid Infrastructure and Reliability 35

10.1 Generation Adequacy Standard 35
10.2 Current SAIDI 35
10.3 Smart Metering 35
11 References 39
3
Agora Energiewende | Report on the German power system
Acronyms Table 1
ACER Agency for the Cooperation of Energy Regulators
BKartA Federal Cartel Office (Bundeskartellamt)

Federal Ministry for the Environment, Nature Conservation,
BMUB Building and Nuclear Safety (Bundesministerium fr Umwelt,
Naturschutz, Bau und Reaktorsicherheit)
Federal Ministry of Economic Affairs and Energy

BMWi
(Bundesministerium fr Wirtschaft und Energie)
Federal Network Agency for Electricity, Gas, Telecommunications,

BNetzA Post, and Railway (Bundesnetzagentur fr Elektrizitt, Gas,
Telekommunikation, Post und Eisenbahnen)
DSO Distribution System Operator
EEG Renewable Energy Act (Erneuerbare-Energien-Gesetz)
ENTSO-E European Network of Transmission System Operators for Electricity
EnWG Energy Industry Act (Energiewirtschaftsgesetz)
ESD Effort Sharing Decision
ETS Emissions Trading System
FiT Feed-in Tariff
GW Gigawatt
GWh Gigawatt Hour
HHI Herfindahl-Hirschman Index
ITO Independent Transmission System Operator
kW Kilowatt
kWh Kilowatt Hour
PV Solar Photovoltaics
RES Renewable Energy Sources
Stadtwerke Municipal Utilities
TSO Transmission System Operator
TW Terawatt
TWh Terawatt Hour
4
Country Profile | Report on the German power system
1 Overview
This report explores the structure of the German power and the first nuclear phase out. After the nuclear disaster
sector. It looks at the fuel mix, production and consump- in Fukushima in 2011, for the second time, Germany took
tion, ownership and market structure, cross-border trade, the decision to phase out nuclear after the first phase out
and energy policy. was reversed in 2010.2 The high-level national goals for the
Energiewende have been integrated into Germanys Energy
The German power system is the largest in Europe. Ger- Concept, a national policy document which sets forth
many also has the highest share of renewable power in Eu- Germanys energy policy to 2050.3
rope in terms of installed capacity, and in fact is the coun-
try with the third largest amount of installed renewables The Energiewende has significant implications for the po-
capacity (excluding hydro) in the world.1 In 2014, renewa- wer sector, which is responsible for roughly 45 percent of
ble energy accounted for more than one quarter of all elec- greenhouse gas emissions from energy.4 It calls for signi-
tricity produced in the country. At the same time, hard coal ficantly improving energy efficiency, increasing the share
and lignite contributed 44 percent of electricity production of electricity generated by renewable resources, all while
in 2014, while nuclear energy accounted for about 16 per- phasing out carbon-intensive and nuclear power plants. It
cent of production. also requires careful consideration of how to most effec-
tively utilise cross-border interconnections with bor-
Four large power companies continue to dominate the dering EU member states to maximize economic effec-
German power market: E.ON, RWE, EnBW, and Vatten- tiveness of the energy transition while maintaining grid
fall. These four companies are responsible for the bulk of stability in the region.
electricity distribution, generation, and retail supply in
the country. While competition has been slow to evolve, it
has been increasing over the past few years. In 2012, more
than 20 percent of all end-user customers had a contract
with a competitive retail supplier. Moreover, as more re-
newables have come on the system, the ownership profile
of generation has been shifting. While the big four power
companies own most conventional generation (hard coal,
lignite, nuclear, and natural gas), they own only about 5
percent of renewable resources. Private citizens, including
farmers own 46 percent of renewable generation in Ger-
many, followed by project developers, industry, and banks.
Germany has introduced a transformative energy transi-

tion called the Energiewende, to decarbonise the economy
2 For a timeline of the Energiewende, see http://energytransition.
while phasing out nuclear energy by 2022. The Energie- de/2012/09/timeline-energiewende/.
wende has been under development for over two deca-
3 BMUB, 2011.
des, and many of its pillars were developed by the coali-
4 In 2012, the power sector accounted for 46.4 percent of energy-
tion government in 2000, e.g. the Renewable Energy Act
related GHG emissions, followed by transport (19.78 percent),
manufacturing and construction (14.65 percent), and other sectors.
1 REN21, 2014, p. 16. UNFCCC, n.d.
5
6
2 Industry Structure, Ownership, and Regulation
Germany at a glance Table 2 55-60 percent in 2035.5 In 2014, renewables already ac-
counted for more than a quarter of electricity produced in
Germany, and 41 percent of installed capacity. As the share
Main Indicators of renewable resources in the power generation mix incre-
80.43 million ases, the ownership profile of generation assets in Ger-
Total population
(2011) many is changing significantly, and is likely to continue to
shift to a more distributed ownership model.
2.6 trillion EUR
GDP
(2013)
Ownership and operation of the German transmission
Average household 3,369 kWh/year system is divided between four transmission system ope-
electricity consumption (2011) rators (TSOs), as shown in Figure 2. As a result, there is not
a single German grid for the highest voltage level, but four
Gross electricity 576.3 TWh
consumption (2014) autonomous zonesand each operator is responsible for
network functioning in its respective zone. The four sys-
tem operators coordinate in order to maximize economic
and operational efficiency among the four zones.6
2.1 Industry Structure
Germany has unbundled most generation, transmission,
The German power system is dominated by four large distribution, and retail activities in the electricity sec-
companies, which continue to own significant genera- tor. European law requires unbundlingor separation, to
tion, distribution, and retail assets: E.ON, RWE, EnBW, and some degreeof generation, transmission, distribution,
Vattenfall. EnBW also owns part of the German transmis- and supply activities of electricity companies. The Euro-
sion system, though as explained below, it has unbundled pean Electricity Market Directive permits several approa-
according to the independent transmission system ope- ches to unbundling, from complete ownership separation,
rator (ITO) model under the Third Energy Package. Table 3 to legal separation of a company or functional separation of
presents the ownership structure of transmission, distri- management functions.7 According to the Energy Industry
bution, generation, and retail service in the energy sec- Act of 2005 (Energiewirtschaftsgesetz, or EnWG)8, trans-
tor, and is followed by more detail on the structure of each mission and supply were required to be unbundled star-
branch of the power sector. ting in 2005, and distribution system operators had until
2007 to complete legal unbundling. About 800 distribution
As mentioned earlier, there is a significant difference bet- companies with less than 100,000 customers were exempt
ween the ownership profile of conventional generation and from the legal unbundling requirement. Rather, they face a
that of renewable resources.
Under the German Energiewende, the share of renewable 5 Targets are fixed in the Renewable Energy Act that has been ad-
resources in the electricity mix is planned to grow to 40- justed in 2014 the last time.
45 percent of gross electricity consumption in 2025, and 6 bertragungsnetzbetreiber, n.d.
7 Directive 2009/72/EC.
8 Gesetz ber die Elektrizitts- und Gasversorgung

(Energiewirtschaftsgesetz), 2005.
7
Market Share of German Electricity Companies Table 3
Total Number
Sector Leading Companies Market Share
of Providers
Amprion
Transnet BW (ENBW)
Transmission 100% Combined 4
TenneT
50Hertz Transmission
The big 4 distribution

EnBW companies own and approximately 890*
E.ON operate a significant DSOs, about 700 of
Distribution
RWE portion of the distribu- which are municipally
Vattenfall tion system, though the owned Stadtwerke
exact level is not clear.
EnBW 56% installed

over 1000 producers
Total E.ON capacity** (June 2014)
(not including indivi-
Generation RWE ~59 % of electricity
duals)
Vattenfall generated (2012).***
EnBW
45.5%
Retail E.ON
of total electricity over 900 suppliers
Suppliers RWE
offtake (TWh).****
Vattenfall
*Of this total number, 806 participated in the BNetzA survey; therefore, data regarding DSO activities is drawn from this smaller pool.
See BNetza, 2013, p. 25., **BNetzA, 2014., ***Volume of electricity produced by the big four energy companies in 2012 taken from
EnBW, 2013, p. 32. This is compared with data on total electricity produced in 2013, based on BMWi 2014b. As there are likely differen-
ces in the methods applied in each report, this number is an approximation., ****BNetzA, 2013, p. 27.
more lenient requirement to unbundle operations (staff) or The distribution system in Germany is the most complex
information. in Europe, with around 900 distribution system operators
serving 20,000 municipalities. This includes the four large
Germanys four transmission system operators (TSOs) have companies as well as about 700 Stadtwerke (municipally
unbundled according to different models. Two of the TSOs, owned utilities) and a number of regional companies. The
TenneT and 50Hertz, are ownership-unbundled. That is, four large DSOsRWE, EnBW, E.ON, and Vattenfallope-
ownership and control of the transmission system is se- rate a significant portion of the distribution grid through
parated from that of distribution, production and sup- concession contracts with municipalities. Under these
ply. The two remaining TSOs, Amprion and Transnet BW, contracts, municipalities rent out their distribution fran-
have unbundled pursuant to the ITO model, under which chise for up to 20 years. Under the Energy Industry Act,
the TSO remains within the integrated company and the these concession agreements have to be renegotiated under
transmission assets remain on its balance sheet. Additi- non-discriminatory rules and can be cancelled. It is worth
onal regulatory conditions are imposed to guarantee the noting that there is a movement today for Stadtwerke to
independence of the ITO from the vertically integrated un- take over their own grid operations as many concession
dertaking. contracts come up for review.
8
COUNTRY PROFILE | Report on the German power system
Ownership share of renewable generation TSO geographic coverage in Germany Figure 2

in Germany, 2012 Figure 1
5% 1%
7%
13%
46%
14%
14%
Private citizens and farmers
Project developers
Industry
Funds/banks TenneT
Regional/municipal utilities 50Hertz
Big four AMPRION
Other TransnetBW
Statistica, 2014 Enet, 2014; http://www.enet.eu/kartestromnetzbetreiber.html
Many of Germanys DSOs are quite small; more than three- and Vattenfall.9 Most of the capacity owned by these com-
quarters of them supply under 30,000 metering points. panies is coal, nuclear, and gas capacity.
Figure 3 illustrates the preponderance of distribution com-
panies serving a small pool of customers. The four biggest electricity generators are also the biggest
retail suppliers, and in total they supplied 45.5 percent of
In 2013, four companies owned about 56 percent of ins- the total delivered volume of energy (in TWh) to end-use
talled generation capacity in Germany: E.ON, RWE, EnBW,
9 BNetzA, 2014.
9
Breakdown of distribution companies had a contract with a competitive (i.e., not default) supplier.
by size of customer base Figure 3 The retail market is discussed in more detail in Section 5.2.
2.2 Regulation
2% 9% Energy policy in Germany is developed and implemented

7%
at the federal and regional levels. Within the government,
the responsibility for energy policy is divided between the
13%
Federal Ministry of Economic Affairs and Energy (Bun-
desministerium fr Wirtschaft und Energie, or BMWi) and
37% the Federal Ministry for the Environment, Nature Conser-
vation, Building and Nuclear Safety (Bundesministerium
fr Umwelt, Naturschutz, Bau und Reaktorsicherheit, or
BMUB). Since 2014, responsibility for the power sector is
32% mainly concentrated in the BMWi with the exception of
nuclear safety and climate protection.
On the federal level, the German power sector is chiefly

regulated by the Bundesnetzagentur (BNetzA), the federal
0-1000 network agency, and by the Bundeskartellamt (BKartA),
the federal cartel off ice. Both off ices fall under the autho-
1,000-10,000 rity of BMWi. The power to regulate the power sector ari-
ses from the federal Energy Industry Act.
10,000-30,000
30,000-100,000 Federal Network Agency (BNetzA): This agency oversees

development of the electricity, gas, telecommunications,
100,000-500,000 postal, and railway markets. This includes regulation of
> 500,000 competition and unbundling of the power and gas supply
networks. BNetzAs responsibilities include ensuring non-
BNetzA discriminatory network access and the control of the net-
work usage rates levied by the transmission system ope-
customers in 2012.10 The remaining energy is supplied by rators and distributers. The Federal Network Agency also
Stadtwerke and independent suppliers. supervises anti-competitive practices.
The retail market in Germany has grown increasingly The German states11 play an important role in regulation of
competitive since retail competition was introduced in the power sector as well. In particular, regulation of reve-
1998. However, the percentage of switching from traditio- nues is divided between federal (BNetzA) and state regu-
nal suppliers for non-industrial customers (especially from latory authorities. General rules are set on the federal level,
traditional Stadtwerke) was relatively low in the begin- while the legal execution and legal process are shared bet-
ning. More recently, retail competition has been increa- ween federal and state regulatory authorities. Today, Ger-
sing, and in 2012 about 20 percent of household customers many has one federal and 11 state regulatory authorities in
10 BNetzA, 2013, p. 27. 11 There are 16 Lnder (states) in total.
10
Ownership Structure of German Energy Companies Table 4
Companies Ownership
Amprion RWE 25.1%, Commerz Real AG 74.9%*
TransnetBW 100% owned by EnBW
TenneT 100% owned by the state of The Netherland
50Hertz Transmission 60% Elia and Elia Asset; 40% IFM**
E.ON 100% privately owned, 75% institutional; 25% retail investors.
RWE 66% institutional, 13% private shareholders, 15% RWEB.***
EnBW 93.5% owned directly & indirectly by the state of Baden-Wrttemberg
Vattenfall 100% owned by the Swedish government
*Amprion. 2011. Retrieved from http://www.amprion.net/pressemitteilung-54., ** 50hertz, 2014., *** RWE, 2013.
place (five states have decided to shift all of their regula- 2.3 Transposition of European Energy Policy
tory responsibility for the power sector to BNetzA.) Grids
covering more than one state, and networks with more Germany has transposed the European directives on the
than 100,000 customers, are regulated by BNetzA as well. internal markets in electricity and natural gas into natio-
nal legislation. Implementation of electricity market libe-
Federal Cartel Office (BKartA): This office is charged ralisation, however, continues, with competition limited,
with ensuring market competition in Germany, primarily but increasing gradually.
through the control of abusive practices by dominant com-
panies. It is responsible for verification regarding energy Germany has transposed European climate and renewables
prices levied by suppliers that operate on a national ba- directives into national law; however, it is delayed in im-
sis. The Bundeslnder (state) cartel authorities or the civil plementing the European Energy Efficiency Directive.12
courts address allegations of excessive rates for end custo-
mers in their states.
The federal and state cartel offices and regulatory authori-

ties share responsibility for liberalisation and deregulation
of the energy markets. Collectively, they focus on promo-
ting a competitive market structure, consistent with the
Energy Industry Act and market liberalisation.
12 Directive 2012/27/EU.
11
12
3 Energy Production and Consumption
3.1 Installed Capacity Section 8. Natural gas, hard coal, brown coal (lignite), and nu-
clear also account for a significant share of installed capacity.
As of July, 2014, Germany had an installed capacity of 192
GW. Renewables account for 83 GW, or about 44 percent of The renewable energy mix, in terms of installed capacity,
total installed capacity. This is the result of Germanys ag- is led by solar photovoltaics (PV) and onshore wind. Bio-
gressive policies supporting renewable energy, particularly mass, hydro, and other renewables (such as geothermal) ta-
through the feed-in tariff (FiT), described in more detail in ken together account for less than a quarter of all installed
renewables capacity.
Main Indicators Table 5

3.2 Production
Installed capacity 192 GW (7/2014) Lignite and hard coal accounted for about 44 percent of all
electricity produced in Germany in 2014. Renewables ac-
Peak demand 83.1 GW (2013) counted for just over a quarter of all electricity production.
Nuclear power, which is to be phased out by 2022, accoun-
Gross electricity ted for 16 percent of power production in 2014.
576.3 TWh (2014)
consumption
Installed capacity 7/2014 in MW (Total: 192 GW) Figure 4
Lignite
Nuclear
18,673
Hard Coal
28,403 37,448
Gas
Other conventionals
83,835
Solar
28,115
34,638
Wind
12,068 Biomass
6,383
21,206 3,918 1,447
Hydropower
Other RES
BNetzA, 2015, p.29.
13
Electricity Production in 2014 (TWh) Figure 5
Lignite
Nuclear
58,5
26,7 Hard Coal
96,9 5 52,4
Gas
Other conventionals
157,3 48,9
109,9 Petroleum
Solar
35,2
Wind
156 20,8
Biomass
Hydropower
AG Energiebilanzen, 2014.
In 2014, German electricity production from renewable 3.3 Consumption

sources reached 157.4 TWh, or 25.8 percent of all electri-
city produced that year13. It is important to note, however, In 2014, gross electricity consumption was 576.3 TWh,
that, the share of renewable energy in total electricity pro- which was 3.8 percent less than in 2013.15 This represents
duction has been much higher (and lower) at certain times a roughly 6.5 percent decrease in gross electricity con-
of the year. Up to now, the maximum share of renewa- sumption since 2008. Under the goals established pursu-
ble energy in electricity consumption in Germany in one ant to the Energiewende (see Section 7), by 2020 Germany
specific moment was on 11 May 2014 (noon) with roughly aims to reduce gross electricity consumption by 10 percent
80 percent of total consumption. Preliminary data for the compared with 2008.
year 2014 indicate a share of 27.3% of total consumption.14
As the share of installed renewables capacity increases, so It is worth noting that trends in Germanys energy pro-
will the average contribution of renewables to electricity ductivity reflect a significant decoupling of energy
production, as well as the maximum share of production at growth from energy consumption (see Figure 15 in chap-
times with generous wind and sun. ter 9). Further improvements in energy productivity can
be expected if Germany is to meet its energy saving goals
under the Energy Concept.16
13 preliminary data, AG Energiebilanzen, 2014a; data for 2014 in

this chapter are preliminary according to AG Energiebilanzen 15 AG Energiebilanzen 2014a.
2014a. More information in detail for 2014 can be found in Agora
16 BMWi, 2014a, p. 8. According to the most recent evaluation of pro-
Energiewende 2015.
gress on the Energiewende, Germany is falling short of meeting its
14 AG Energiebilanzen, 2014. energy efficiency targets for 2020.
14
3.4 Peak Demand
Germany continues to be a winter peaking country pri-

marily due to the demands of lighting and water and space
heating; 6.1 percent of space heating is fueled electrically,
including night storage systems and heat pumps.17
The annual load profile for Germany shows, that the annual
peak of 84.0 GW was reached on December 7 at 5:00pm.
Similarly, in 2013, peak demand was reached on December

5 at 6 pm, totaling 83.1 GW. The lowest demand in 2013 oc-
curred on June 2 at 7 am, totaling 32.47 GW.18
3.5 Planned Conventional Power Plants
As of July 2014, 6,558 MW of thermal generation was un-

der construction, with completion scheduled by 2016,
while 11,251 MW of capacity are planned to leave the sys-
tem by 2018. Against the background of bottlenecks in
the transmission grid between North and South, Southern
Germany is experiencing some challenges regarding re-
source adequacy in part due to the decommissioning of 5
GW of nuclear capacity in 2011, partly due to planned clo-
sures of additional 3.869 MW. According to BNetzA, Sou-
thern Germany can expect a potential negative balance of
up to 5,717 MW by 2018.19 It should be mentioned that the
government can reject applications for closure of plants for
system stability reasons (Systemrelevanz).
17 BDEW, 2014, p. 19.
18 ENTSO-E, 2014a.
19 All these figures are changing frequently; hence, please, refer to

BNetzA for the latest updates, especially the Kraftwerksliste and the
Kraftwerksstilllegungsanzeigenliste; www.bundesnetzagentur.de.
15
16
4 Imports and Exports
Germany has significant interconnection capacity with years ago. More recently, 50Hertz signed a virtual phase
neighboring EU member states. It is interconnected with shifter agreement with PSE Operator, the Polish TSO. A
Austria, Switzerland, the Czech Republic, Denmark, France, virtual phase shifter agreement is a contractual agreement
Luxembourg, the Netherlands, Poland, and Sweden.20 defining a maximum limit for cross-border electricity
flows, with flows limited where necessary via re-dispat-
In 2012, Germany had 21.3 GW of available interconnec- ching. Physical phase shifting transformers are expec-
tion capacitya high level compared with an annual peak ted to be installed around 2016 to limit flows through the
demand of 83.1 GW.21 Still, only about half of this export Czech Republic and Poland.24
capacity is utilized at any given time. Export capacity has,
on average, been growing over the past few years, and is Another solution to the problem of unplanned flows has
expected to continue to grow as planned interconnections been set forth in an analysis commissioned by the regula-
expand cross-border transmission capacity with several tors from Poland, the Czech Republic, Slovakia and Hun-
neighbouring countries.22 gary. The study identified significant unplanned flows
in the CEE region, with Poland and the Czech Republic
Germany is a net energy exporter. The biggest export mar- most strongly affected. It recommended coordination of all
kets are The Netherlands and Austria, while it draws net cross-border transactions via the introduction of market
energy imports mainly from the Czech Republic. Trade coupling and flow-based capacity allocation methodology,
between Germany and France requires a closer view:
While Germany exports electricity according to finan-
cial transactions, physical flows are to a certain extent Import/Export balance 2003-2014
(in GWh, physical flows) Figure 11
transit flows from France via Germany to Switzerland.
There is a significant volume of unplanned physical flows
40000
(loop flows) occurring between Germany and its neigh-
bours. Due to constraints on the German transmission 35000
system, the excess power from the north travels through 30000
the transmission systems of neighbouring countries, and
25000
particularly through Poland, the Czech Republic, or via the
GW/h
Netherlands, Belgium, and France.23 20000
15000
In response to these unplanned flows, German TSOs have
10000
taken several steps with neighbouring countries. Phase-
shifting transformers, which limit the flow of electrons 5000
cross-border, have been deployed to limit transit flows
0
through The Netherlands to Belgium and France already 15 03 04 05 06 07 08 09 10 11 12 13 14
20 Amcharts, n.d. ENTSO-E, n.d.
21 BNetzA, 2013, p. 13.
22 ENTSO-E, 2012a.
23 ACER 2014, p 149ff, BNetzA, 2013, p. 90. 24 BNetzA, 2013, p. 90.
17
Import/Export balance (exports imports) (in GWh, physical flows) Table 6
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014*
AT 4457 8376 8957 11621 9390 7895 7955 10566 8748 7126 9000
CH 9044 16501 10777 11921 11149 10506 11972 11238 9591 7968 6900
CZ -12972 -12617 -11407 -8535 -6614 -7722 -8836 -7522 -5742 -6956 -2400
DK 3338 583 3972 1472 1364 3615 3769 -2149 -6738 2539 500
FR -15086 -15739 -15334 -15705 -9701 -9171 -14331 -20176 -12437 -10574 -14000
LU 4177 4248 4330 4413 4467 4387 4798 4655 4592 4586 4800
NL 16799 18935 22053 17763 18030 5360 5870 6368 21817 24219 24000
PL 2708 1220 1826 4843 5482 5483 5167 4705 5877 4909 9200
SE 176 -2663 453 -867 -1964 221 1348 -1419 -2612 -29 -1000
Totals 12641 18844 25627 26926 31603 20574 17712 6266 23096 33788 35900
*ENTSO-E, n.d.; data for 2014: AG Energiebilanzen
stressing the need for all significant constraint boundaries tion and Congestion Management (CACM) Code.27 The res-
to be included in the process. pective Guideline is currently progressing through the Co-
Because of its central location in Europe and high level of mitology procedure, following a recommendation by ACER
interconnection with neighboring member states, Ger- to adopt the Guidelines.28 It recommends that bidding zones
many belongs to four of six Electricity Regional Initiati- be defined so as to support congestion management and
ves.25 Over the past few years, the German market has be- market efficiency, by defining bidding zones by congestion
come more closely linked to neighboring markets through rather than national boundaries. However, the text is not
market coupling: explicit on this point and the question of what might con-
stitute the most efficient means of managing congestion
Nordic market and Germany (2009) market splitting, or coordinated redispatch is left open.
Central-West region (2010)
Central-West and Nordic region (2013)26
In fact, market coupling and flow-based capacity allocation

methodology are to be implemented as part of the market
integration process, and as defined by the Capacity Alloca-
25 ACER, 2012. For more on the Electricity Regional Initiatives,

see BNetzA, 2009. 27 ENTSO-E, 2012b.
26 CAO, n.d., TenneT, n.d. 28 ENTSO-E, 2013.
18
Physical electricity flows between Germany and neighbouring countries Figure 7
802 PL
NL 719
737
DE
748 703 616
CZ 187
170
2,327 234 SK
904
805 220
AT
918 74 HU
1,229
FR CH 589 58 171
226 180 SL
344 IT
According to ACER Market Monitoring Report 2014
19
20
5 Electricity Market
5.1 Wholesale Market, Prices and Liquidity EPEX SPOT in Paris, and the Energy Exchange Austria
(EXAA) in Vienna.31
5.1.1 Electricity Market Design
The German wholesale electricity market is broadly made 5.1.2 Market Liquidity
up of three elements: (1) a forward market; (2) a day-ahead As described earlier, the generation market is quite con-
market; and (3) an intra-day market. Electricity supply centrated, with the four largest private supply companies
deliveries in the forward market can be negotiated up to owning about 56 percent of installed capacity and produ-
seven years in advance, but for liquidity reasons typically cing about 59 percent of the electricity generated in Ger-
only look out three years, and in fact most futures trading many. Total output of the largest four producers in 2012
focuses one year ahead.29 was as follows:
While the majority of wholesale transactions occur RWE, 155.5 TWh

through bi-lateral over the counter contracts, an increa- E.On, 93.1 TWh
sing proportion of transactions occur via power exchan- EnBW, 59.05 TWh
ges.30 Most trading for Germany occurs on three exchan- Vattenfall, 68.8 TWh32
ges: the European Energy Exchange (EEX) in Leipzig, the
Wholesale electricity prices in Germany, forwards 2007 2014 Figure 8
140
120
100
EUR/MWh
80
60
40
20
0
2007 2008 2009 2010 2011 2012 2013 2014
Baseload Peakload
EEX, 2014.
29 For more on the wholesale markets, see BNetzA, 2013, pp. 91-119. 31 BNetzA, 2013, pp. 93-94.
30 BNetzA, 2013, p. 14. 32 EnBW, 2013, p. 32.
21
Share of consumption by customer class, Nordic regions. Moreover, market liquidity has been in-
TWh (2012) Figure 9 creasing over the past few years, in part due to the obliga-
tion that TSOs sell renewable energy on the spot market.
Over the past several years, wholesale market prices have

been declining steadily in Germany, as illustrated in Fi-
gure 8. This is due to a combination of an oversupply of
low-marginal cost generation, as well as flat demand due
to the recession and increased energy efficiency. The very
134,8 low marginal production cost of renewables, often cited as
27%
a cause of low wholesale prices, rarely if ever sets mar-
242,4 ket clearing prices and is therefore not directly implicated,
48% anymore than is the very low marginal cost of nuclear or
lignite. These resources are early in the merit order, have
limited dispatchability, and therefore push other resour-
124,5 ces to the margin when they are available. It is the mix
25% of those other resources both their marginal costs and
their flexibility to respond to the availability of lower-cost
energy from nuclear and renewables that is driving and
Small will drive the trend in wholesale prices for the foreseeable
future.
Medium
Large 5.2 Retail Market
BNetzA, 2013, p. 26. Note that these data are based on bot- Germanys economy is highly industrialized, and as illust-
tom-up analysis performed by BNetzA, rated in Figure 9, large industrial customers accounted for
and reflect responses from 806 out of 888 suppliers.
nearly half of German consumption in 2012. Residential
customers, which are the largest customer class by num-
Wholesale market concentration in Germany remains re- ber, accounted for about a quarter of total consumption, and
latively high. In 2011, the wholesale market Herfindahl- smaller industrial and business customers accounted for
Hirschman Index (HHI)33 was measured at 2,012, which the just over a quarter.
is considered a highly concentrated market.34 However,
it is important to note that market concentration is lower Since 1998 all customers have been able to choose their
in combined bidding zones, such as the Central-West and electricity supplier. However, in practice the percentage
of switching from traditional suppliers for non-industrial
33 The HHI is defined as the sum of the squares of the percentage
customers (especially from traditional Stadtwerke) has
market share of each market participant. The Index can range in been a relatively slow process. When retail competition
value from 0 to 10,000. The higher the index, the more concentrat- was first introduced, there were no standards for contracts,
ed the market. A market with an HHI of less than 1,000 is generally
times and switching costs, which caused a great deal of
considered competitive, a market with an HHI in the range of 1,000
to 1,800 would be considered as moderately concentrated, while
uncertainty. As regulation has been introduced to control
a market with an index above 1,800 would be considered highly these factors, customer switching has increased. In 2012,
concentrated. 20 percent of customers had contracts with a competitive
34 European Commission, 2011. supplier (i.e., not their default supplier), and more than 43
22
Average volume-weighted retail price for The remaining energy is supplied by publicly owned
household customers (ct/kWh) in 2014* Figure 10 Stadtwerke (most or fully owned by the local authority) and
independent suppliers.
35
Electricity prices (in ct/kWh) have risen for both household
30 and industrial customers over the past years. Household
0.53
1.79
25 2.05 electricity prices have increased for default customer con-
4.65 tracts with default suppliers as well as for those with non-
ct/kmwh
20 standard contracts with a default or other supplier.38 The

6.24 main reasons for the steep increase in prices are:
15 29.13
10
Increases in fees (in particular the EEG surcharge)
13.87 Increases in taxes
5
Increases in cost of energy procurement39
0
2014
The EEG surcharge (arising from the German Renewable
Other* Energy Act Erneuerbare-Energien-Gesetz) alone increa-
sed from 8.8 percent of the average household customer bill
Concession fees in 2010 to 17 percent in 2013. This increase is the result of a
combination of factors, including the growing share of rene-
Electricity tax
wable generation supported by the FiT, decreasing wholesale
VAT energy prices (which have the effect of increasing the level
of FiT which must be paid), and exemptions for many large
EEG-surcharge industrial customers which has transferred these costs
Supply, surcharge, margin on to other customers. In 2015, for the first time, the EEG
surcharge will decrease from 6.24 to 6.17 ct/kwh.
BDEW, 2014; *Other charges are the sum of: billing, 19 Strom-
NEV surcharge, metering operations, offshore liability As a caveat it shall be noted that electricity prices for in-
surcharge, KWKG surcharge, and metering.
dustrial consumers vary significantly in Germany. Espe-
cially many large energy-intensive companies are exem-
percent of customers remained with their default supplier, pted almost entirely from levies and taxes. The following
but under a competitive contract. The remainder remained section discusses this problem in slightly more detail.
on a default contract with their default supplier.35
5.2.1 Breakdown of Electricity Bill
For 2013, Germanys retail electricity sector was identified In order to understand electricity prices in Germany, it is
as having a low level of market concentration, falling well important to understand the significant portion of the bill
below a HHI of 1,000.36 As mentioned earlier, in 2012 the covering taxes and levies. For residential customers, taxes
four biggest retailers supplied 45.5 percent of the total de- and levies account for roughly half of their electricity bill,
livered volume of energy (in TWh) to end-use customers.37 while for industrial customers the share rises to almost 60
percent.
35 BNetzA, 2013, p. 128.
36 ACER, 2014, p. 49. 38 BNetzA, 2013, p. 141.
37 BNetzA, 2013, p. 27. 39 BNetzA, 2013, p. 152.
23
Components of industrial electricity Figure 11 demonstrates the components of a medium-sized

(SMEs) bill in Germany (ct/kWh)
z
Figure 11 industrial customers electricity bill.40 On the left is the
bill with all taxes and levies, which account for about 60%
20 of the bill. On the right is the reduced bill, re-calculated
18 based on the assumption that the customer qualifies for all
16 available exemptions.
14
As Figure 11 demonstrates, the difference can be signifi-
ct/kmwh
12
cant. Without exemptions, the small or medium sized in-
10
dustrial customer in this example will pay just over 17 ct/
8
kWh, while when the maximum exemptions apply, they
6
pay just over 9.5 ct/kWh a 44% reduction. The largest
4
cuts are found on the EEG surcharge, which pays for sup-
2
port of renewable energy in Germany, and is reduced by
0
No exemptions With exemptions
more than 90 percent from 6.24 ct/kWh to 0.45 ct/kWh.41
Taxes drop by nearly a quarter, and the network tariff
drops by nearly 80 percent. Concession fees are completely
Metering and billing
eliminated.42
Additional surcharges*
The availability of exemptions for many industrial cus-
Concession fees
tomers makes it difficult to compare industrial electricity
Net network tariff prices in Germany with those in other countries. Howe-
ver, one can state that electricity prices for large industrial
Tax (electricity and VAT) consumers in Germany are at a similar level or lower than
in most other European countries (Figure 12).
Energy procurement and supply
EEG surcharge The difference between industrial prices in Germany with

and without available exemptions can be significant. Wi-
BNetzA, 2013, pp. 15-16., *KWKG, 19 StromNEV, thout exemptions, industrial customers in Germany pay
and offshore liability surcharges.
one of the highest retail rates in Europe. With exemptions,
they pay one of the lowest.43
Figure 10 illustrates the charges on an average household Furthermore, some large energy-intensive companies pay
customers bill. The energy and network tariffs account for even less for electricity, because they are exempted from
about half the bill, while taxes and surcharges account for
the rest. The EEG surcharge accounts for 17 percent of the
40 In this case, the customer is assumed to have 24 GWh/year annual
overall bill, followed by VAT at 15 percent. consumption; 4,000 kW annual peak load and 6,000 hours annual
usage time, and be connected to the medium-voltage grid (10 or 20
Compared to other Member States, German household kV). BNetzA 2013, p. 15.
electricity prices in 2014 were the second highest in the 41 EEG surcharge was 5.28 c/kWh in 2013, 6.24 c/kWh in 2014 and
EU, at 29 ct/kWh. will be at 6.17 c/kWh in 2015.
42 BNetzA, 2013, pp. 15-17.
43 European Commission, 2013.
24
Comparison of end-use electricity prices in 2012 for energy intensive industries

(150 GWh annual consumption) Figure 12
104.4
100
80
Prices in EUR/MWh
61
60 56
52
53.6 59
40 49.6 49 46.5
20
0
Germany France Netherlands EU-27
Agora Energiewende 2014.b
basically all taxes and surcharges while purchasing their small businesses), grid costs are charged primarily on an
electricity at the wholesale market at record low prices.44 energy-use basis, plus a fixed customer charge.45
5.3 Grid Cost Allocation Grid tariffs are calculated based on direct grid costs and
certain components of providing system services, namely:
In Germany, all grid costs are allocated to end-use cus-
tomers. Supply only has to pay the one-time cost of grid At the transmission level, system costs consist of the
connection; all other costs are borne by end users. Costs are cost of managing grid bottlenecks (i.e., redispatch, rene-
allocated differently among large and small end-use custo- wables curtailment, and capacity payments for reserves,
mers. Charges for industrial customers are based primarily minus energy rates for called reserves).
on the level of peak demand (kW) that is coincident with At the distribution level, the balancing costs for devia-
system peak. Grid tariffs for these customers are charged tions associated with standard load profiles.
as a combination of per kW demand charges and per kWh
energy-use charges, based on the demand and energy use An important feature of grid cost allocation in Germany is
characteristics of the customer class. The demand charge that costs are allocated exclusively within a distribution
tends to be the higher charge, while energy-use charges grid operators territory. This has the practical effect that
are lower. For low-energy use customers (residential and grid tariffs can vary substantially from one distribution
territory to another. There is one exception to this: A na-
tionwide system of cost equalization governs the costs of
hooking up offshore wind parks.
44 http://www.agora-energiewende.de/fileadmin/downloads/pub-
likationen/Analysen/Comparing_Electricity_prices_for_industry/
Agora_Comparing_Electricity_Prices_for_Industry_web.pdf 45 For more on grid tariff design, see Jahn, 2014.
25
The 888 or so DSOs are heterogeneous and thus have very comparison with larger, more populated DSO territories,
different network costs, as a result to the density of de- where reduced grid tariffs for distributed generation are
mand within a given distribution territory (number of shared across a broader customer base.
customers and level of consumption), and investments for
RES connections. The connection costs of wind parks, bio-
mass power plants, and PV systems are exclusively borne
by customers of the local distribution networks where the
facilities are located. As a result, the network tariffs for
customers can vary widely, from 4.2 to 8.88 ct/kWh for re-
sidential customers in 2014.
Germany faces a challenge with grid cost allocation

within this framework as the share of distributed gene-
ration increases. When the tariff system was establis-
hed, distributed generation was seen as a way to unbur-
den the upstream power grid. This system benefit (avoided
upstream voltage costs) was passed to distributed genera-
tors in the form of reduced grid tariffs. As more and more
distributed generation has come on the system, however,
the tariff exemptions have often come to exceed actual
system benefit. Almost all of Germanys more than 1.5 mil-
lion PV facilities are connected to the distribution net-
works. On the one hand, the high penetration of distributed
generators is driving grid expansion, particularly in rural
areas. On the other hand, these same generators benefit
from reduced grid tariffs, significantly raising distribution
costs for other customers. The cost reallocation required by
these grid tariff exemptions represent (nationwide) on the
order of 9 percent of total grid revenues.46
This problem is exacerbated by the fact that grid costs are

paid almost entirely within each DSOs territory. This has
led to very different costs associated with distributed ge-
neration from one distribution territory to the next. And
as Germany continues to implement the Energiewende, the
penetration of distributed renewables can be expected to
increase. Small, rural territories are often impacted more
significantly, as a small number of customers must pay for
a relatively high level of distributed generation. This is in
46 At the same time, self-generation, which also has the result of re-
duced payments for grid services, only contributes to reallocation
of about 1 percent of grid revenues. See Jahn, 2014.
26
6 Electricity Balancing/Reserve Markets
The energy balancing market in Germany (also known as

the system services market) consists of services structu-
red into three main tiers: (1) the primary control reserve,
activated within 30 seconds and available up to 15 mi-
nutes; (2) the secondary control reserve, activated within
5 minutes and available up to 15 minutes; and (3) tertiary
control reserve, activated within 15 minutes and available
for a minimum of 15 minutes up to 1 hour, or several hours
in the case of several incidents. Primary and secondary
reserves are procured on a weekly basis; tertiary reserves,
on a daily basis.47
German energy balancing market Figure 13

Power
Time [Minutes]
Primary control reserve jointly provided by all TSOs in synchronous area
and activated within seconds
Secondary and minute reserve provided by the TSO in whose control area
the imbalance occured
Reserve beyond four quarter-hours provided by the balance responsible
party which triggered the original imbalance
Regelleistung.net, n.d.
47 bertragungsnetzbetreiber, n.d., a.
27
28
7 Decarbonisation Policies and

the German Energiewende
The EU has set the goal of reducing GHG emissions 20 The Energiewende aims to reduce greenhouse gas emissi-
percent below 1990 levels by 2020. This target is divided ons economy-wide by 8095 percent by 2050.
between sectors covered under the EU Emissions Tra- The high-level national goals for the Energiewende have
ding System (ETS), covering about 45 percent of total GHG been integrated into the Energy Concept, a national policy
emissions, and the Effort Sharing Decision (ESD), which document which sets forth Germanys energy policy to
sets targets for all remaining economic sectors. Under the 2050.50 The German energy transition has significant im-
ETS Directive there are no country-level targets; however, plications for the power sector, as reflected in the following
to implement the Energiewende, Germany has set a target table, which represents Germanys quantitative interim
of reducing GHG emissions by at least 40 percent compa- and 2050 targets relating to the power sector.51
red to 1990 levels by 2020.48 The ESD caps Germanys GHG
emissions in non-ETS sectors at 14 percent below 2005 le- As discussed in Sections 8 and 9, these goals are being im-
vels by 2020.49 plemented through targeted legislation.
Targets of the Energiewende Table 7
2020 2025 2030 2035 2040 2050
Reduction in GHG emissions 80-

40% 55% 70%
(compared with 1990) 95%
At
Increase in share of RES 40- 55-
least
in gross electricity consumption 45% 60%
80%
Reduction of primary energy consumption
20% 50%
(compared to 2008)
Reduction in gross electricity consumption 10% 25%
Share of electricity generation from CHP plants 25%
Reduction of energy use in transport sector

10% 40%
(against 2005)
BMWi, 2014a, p. 4.
48 BMWi, 2014, p. 4. 50 BMUB, 2011.
49 European Commission, n.d. 51 For targets related to other energy sectors, see BMWI, 2014a, p. 4.
29
30
8 Renewable Energy
Under the European Renewable Energy Directive, Ger- The quantitative targets for renewable energy are as follows:
many has been allocated an 18 percent target for the share
of gross final energy consumption to be met by renewable Wind onshore: additional 2,500 MW/year (net)
energy by 2020.52 This target has been incorporated into PV: additional 2,500 MW/year (gross)
the German Energy Concept targets. In line with the Ener- Wind offshore: 6,500 MW by 2020
giewende, the German Renewable Energy Act (EEG) further Biomass: additional 100 MW per year (gross)55
specifies a target for renewable energy from electricity:
4045 percent by 2025, and 5560 percent by 2035.53 Notably, these targets reflect a reduction in ambition for
offshore wind and biomass, due to their high costs compa-
Under the EEG, the main support mechanism for renewa- red to other renewable resources. The FiT levels from Au-
ble energy in Germany used to be the FiT, which has been gust 2014 have been adjusted as documented in table 8.
in place since 200054 and provides a fixed price for power
produced from renewable sources. The FiT is set for a 20- It is important to note that the law introduces flexible caps
year term, varies by technology, and the tariff level is set at (breathing cap) to reach the annual renewable energy
regular intervals. The cost of the FiT is covered through a targets. If targets are met in a given year, the following
surcharge on end-use customer electricity bills, as descri- years FiTs for that technology will be reduced by a stan-
bed in Section 5 of this report. dard rate. If targets are exceeded, the incentives will de-
crease, and the more they are exceeded, the greater the
In 2014, the Renewable Energy Act was amended, with the decrease in FiTs. Conversely, if the target is not met, the FiT
goal of continuing progress towards Germanys renewable will not decrease but might even increase.56
energy targets, while controlling cost. The amendments to
the Act set quantitative targets for renewable energy, by Thanks in large part to the German FiT scheme, Germany
resource, and established new FiT levels for each techno- has seen a significant rise in the share of electricity gene-
logy. Importantly, the 2014 amendments shift renewab- rated by renewable resources for more than a decade.
les support from a traditional FiT to a mandatory Feed-
in-Premium scheme. That is, instead of receiving the FiT It is important to note that a significant change to the Re-
amount directly, all new installations larger than 500 kW newable Energy Act is expected in 2016. In order to comply
(and larger than 100kW after 2016) will need to sell the with new EU environmental state aid guidelines, Germany
electricity they produce, themselves or through a third will introduce auction schemes for renewable energy in
party, and will then be rewarded the difference between 2016, to enter into effect in 2017.57 It is foreseen to open a
the FiT and the revenues earned on the wholesale electri- certain portion of totally auctioned capacity for assets in
city market (direct marketing). other countries as long as physical transmission can be
guaranteed.
52 Directive 2009/28/EC.
53 This is in line with the 35 percent target for 2020 and 50 percent
target for 2030 listed in Figure 18.
55 Agora Energiewende, 2014a.
54 In fact, the introduction of the feed-in tariff in Germany dates back
56 Agora Energiewende, 2014a, p. 2.
to 1991when the Stromeinspeisegesetz, the predecessor of the EEG,
was adopted. 57 Agora Energiewende, 2014a.
31
FiT Levels under German Renewable Energy Act, from August 2014 Table 8
Technology Feed-in tariff level Annual degression
8.9 ct/kWh (initial feed-in tariff 0.4% on a quarterly basis (degression may in-
Wind onshore for at least 5 years). crease up to 1.2% or decrease up to zero de-
4.95 ct/kWh (basic feed-in tariff). pending on amount of installed capacity.
0.5%/month (degression may increase up to

9.23 ct/kWh to 13.15 ct/kWh, de-
Photovoltaics 2.8% or decrease up to zero depending on
pending on capacity size.
amount of installed capacity.
1.5% on an annual basis for landfill gas, sewage

5.83 ct/kWh to 23.73 ct/kWh, de- treatment gas and mine gas.
Biomass/biogas pending on specific technology 0.5% for biomass on a quarterly basis (flexible
and capacity size. cap: degression of 1.27% if annual gross incre-
ase > 100 MW).
Degression of initial feed-in tariff:

15.4 ct/kWh (initial feed-in tariff
of 0.5 ct/kWh in 2018,
Wind offshore at least 12 years).
of 1.0 ct/kWh in 2020,
3.9 ct/kWh (basic feed-in tariff).
by 1.0 ct/kWh annually from 2021.
3.5 ct/kWh to 12.52 ct/kWh, de-

Hydropower 0.5 % on an annual basis.
pending on capacity size.
Agora Energiewende, 2014a.
Electricity supply from renewable sources, 20002014, and prospective supply 2015-2020 Figure 14
35000 60%
30000 50%
25000
40%
20000
GW
30%
15000
20%
10000
5000 10%
0 0
90
92
94
04
06
18
96
20
98
00
02
08
10
22
24
26
12
14
16
28
30
32
34
34
20
20
20
20
20
20
20
20
20
19
20
20
20
20
20
20
19
19
19
20
20
20
19
20
Hydropower Wind (onshore) Wind (offshore) PV Biomass Others
BMWi, 2014d., ko-Institut 2014
32
9 Energy Efficiency
Under the Energy Concept, Germany has set the goal of One of the main instruments to achieve energy savings in
reducing primary energy consumption by 20 percent Europe to 2020 is Article 7 of the European Energy Effici-
by 2020, and 50 percent by 2050 (compared with 2008). ency Directive. Article 7 sets mandatory end-use energy
This is in line with the European goal of reducing primary savings targets for Member States of 1.5 percent each year
energy consumption 20 percent by 2020 Europe-wide. from 2014 to 2020.60 This target can be met through imple-
Germany further aims to reduce gross electricity con- mentation of an energy efficiency obligation on all energy
sumption by 10 percent by 2020 and 25 percent by 2050.58 distribution companies or all energy service providers, or
While the country has a number of policies and measu- through equivalent alternative measures.
res in place to support energy efficiency, and has achie-
ved steady energy savings over time, it is not enough. The In December 2014, the federal government has adopted
Second Monitoring Report, which tracks progress on the a National Action Plan Energy Efficiency that proposes a
Energiewende, emphasizes that Germany must do more if it large set of instruments ranging from competitive tenders
is to meet its goal of achieving 20 percent primary energy to tax exemptions for building renovations. Some measu-
savings by 2020.59 res need legislative decision, others can be implemented
directly.61
Energy productivity in Germany, 1990 - 2013 Figure 15
150
125
100
Index 1990=100
75
0 91 2 3 4 5 6 97 8 9 0 01 2 3 4 5 6 7 8 9 10 1 1 12 1 3 1 4
19 9 19 19 9 19 9 19 9 19 9 19 9 19 19 9 19 9 200 20 200 200 200 200 200 200 200 200 20 20 20 20 20
Gross national product (Indexed, 1990 = 100)

Gross electricity consumption (Indexed, 1990=100)
Statistisches Bundesamt
60 However, because of available exemptions and the possibility that

the transport sector can be excluded from the energy savings tar-
58 BMWi, 2014a, p. 4. get, the target is closer to 0.75 percent energy savings per year.
59 BMWi, 2014a, p. 8. 61 BMWi, 2014e.
33
34
10 Grid Infrastructure and Reliability
10.1 Generation Adequacy Standard 10.2 Current SAIDI
Currently, the German power system has a surplus of ca- SAIDI, or the System Average Interruption Duration Index, is
pacity, though due to the stepwise phase out of nuclear ca- a standard measure of the average number of minutes of ser-
pacity, some challenges might arise in near future in Sou- vice interruption per customer on the low-voltage network
thern Germany.62 in a given year. Figure 16 reflects SAIDI in six member states,
including Germany, and accounts for unplanned interruptions,
In addition to the nuclear phase out, some conventional ca- excluding exceptional events. As this figure indicates, reliabi-
pacity will be retired in the coming years (see above, chap- lity of service in Germany is high compared to neighbouring
ter 3.5. for more details). Although several GW new coal and countries, ranging from about 14 to 21 minutes of interrup-
gas plants are currently under construction, experts ex- tions annually per customer over the past eight years, with an
pect potential shortages to arise in the next decade. If the overall gradual improvement over time.
current market design is suitable to incentivise new re-
sources able to meet peak demand and thus to avoid power 10.3 Smart Metering
shortages in the 2020s, is currently disputed in Germany.
In autumn 2014 the government is launching a discussion Germany has taken several steps towards increasing the
process on potential market reform including a debate penetration of smart meters in the country. As described
about an improved energy-only market and capacity re- in this section, the definition of smart meter, and func-
muneration mechanisms as well. tionalities associated with smart meters, has evolved in
SAIDIunplanned interruptions, excluding exceptional events Figure 16
90.0
80.0
Minutes lost per customer
UK
70.0
60.0 France
50.0
Austria
40.0
Netherlands
30.0
20.0 Germany
10.0
Denmark
0.0
0 0 2 0 0 1 0 03 0 0 4 0 0 5 0 0 6 2 0 0 7 0 0 8 0 0 9 2 0 1 0 20
11
20
12
20 2 2 2 2 2 2
CEER, 2014.
62 ENTSO-E, 2014b, p. 47.
35
parallel to European requirements regarding intelligent or Electricity Directive.64 The analysis concludes that for the
smart metering systems. first three groups of end users delineated in 21(c) of the
EnWG, installation of smart meters is cost-effective and
The German Energy Industry Act requires installation of therefore recommended. For small consumers, the analysis
measurement systems for three categories of end users: recommends replacement of current meters with intel-
ligent meters within the normal replacement cycle for me-
1. New buildings or those undergoing a major renovation ters.
as defined by Directive 2010/31/EC on the Energy Per-
formance of Buildings The distinction between smart and intelligent meters
2. For final consumers with an annual consumption gre- made in the Ernst & Young report is that smart meters
ater than 6,000 kWh communicate information on energy consumption and
3. For plant operators under the Renewable Energy Act time of use to energy companies, while intelligent meters
or power-heat coupling law for new plants with an ins- show end users their actual energy usage via an in-home
talled capacity of more than 7 kW63 display, but do not communicate this information to the
utility.65 The report also notes that intelligent meters are
A measurement system is defined as a device connected easily upgraded to smart meters.
to a communications network measuring device for de-
tecting electrical energy, which reflects the actual energy As of 2013, about 500,000 meters had been installed in
consumption and actual time of use. Installation of mea- Germany.66 A number of barriers currently exist, however,
surement systems for these customers is only required if to installation of smart meters as required by law. Firstly,
technically feasible. Technical feasibility is met if measu- meters have not yet been developed that comply with new
rement systems that meet the statutory requirements are security standards.67 Secondly, the Ernst & Young recom-
available on the market. mendations have not yet been incorporated into a national
roll-out strategy for smart meters. And Thirdly, German
In all other buildings, the act calls for installation of mea- law allows third parties (that is, companies independent
surement systems as far as is technically and economically of the DSOs, who are the default option) to serve as mete-
feasible. Economic feasibility is defined as replacement at ring operators and metering service providers. The DSO is
no extra cost to the consumer, or as established by an eco- required to allow the metering service provider to install
nomic evaluation of the BMWi.
64 The Electricity Directive sets the indicative goal of equipping 80
In 2013, BMWi released a cost-benefit analysis, prepared percent of consumers with intelligent by 2020. While intel-
ligent meters are not defined in the Directive, the European
by Ernst & Young, to determine the cost-effectiveness of
Communication on Smart Grids (SEC/2011/463 final), references
installing smart meters in Germany under Annex I of the the Smart Grid Task Forces definition of smart meters: Meter
with extra functionality allows the meter to collect usage data and
transmit this data back to the via the AMI (Advanced Metering
Infrastructure). Load control and tariff management are also ex-
amples of possible extra functionality. The Smart Meter has provi-
sions for a consumer interface that enables the consumer to moni-
tor energy usage. See European Commission Task Force for Smart
Grids, 2010, p. 43.
65 Further explanation on the functionality of smart meters and

smart metering systems in Germany can be found in BSI, 2014.
66 SmartRegions, 2013, p. 47.

63 EnWG, Section 21(c). 67 BSI, 2014.
36
their own devices, so long as the devices fulfill regulatory

requirements. 68 However, customers cannot be bound by a
metering contract for more than 3 years.
68 SmartRegions, 2013, p. 45.
37
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42
43
Publications of Angora Energiewende
IN English
12 Insights on Germanys Energiewende

An Discussion Paper Exploring Key Challenges for the Power Sectorz
A radically simplified EEG 2.0 in 2014

Concept for a two-step process 2014-2017
Benefits of Energy Efficiency on the German Power Sector

Final report of a study conducted by Prognos AG and IAEW
Comparing Electricity Prices for Industry

An elusive task illustrated by the German case
Comparing the Cost of Low-Carbon Technologies: What is the Cheapest Option?

An analysis of new wind, solar, nuclear and CCS based on current support schemes in the UK and Germany
Cost Optimal Expansion of Renewables in Germany

A comparison of strategies for expanding wind and solar power in Germany
Load Management as a Way of Covering Peak Demand in Southern Germany

Final report on a study conducted by Fraunhofer ISI and Forschungsgesellschaft fr Energiewirtschaft
The German Energiewende and its Climate Paradox

An Analysis of Power Sector Trends for Renewables, Coal, Gas, Nuclear Power and CO2 Emissions, 2010-2030
in german
12 Thesen zur Energiewende

Ein Diskussionsbeitrag zu den wichtigsten Herausforderungen im Strommarkt (Lang- und Kurzfassung)
Auf dem Weg zum neuen Strommarktdesign: Kann der Energy-only-Markt 2.0 auf Kapazitts-
mechanismen verzichten?
Dokumentation der Stellungnahmen der Referenten fr die Diskussionsveranstaltung am 17. September 2014
Ausschreibungen fr Erneuerbare Energien

Welche Fragen sind zu prfen?
Das deutsche Energiewende-Paradox. Ursachen und Herausforderungen

Eine Analyse des Stromsystems von 2010 bis 2030 in Bezug auf Erneuerbare Energien, Kohle, Gas, Kernkraft und CO2-
Emissionen
All publications may be downloaded at www.agora-energiewende.de
44
Publications of Angora Energiewende
Der Spotmarktpreis als Index fr eine dynamische EEG-Umlage

Vorschlag fr eine verbesserte Integration Erneuerbarer Energien durch Flexibilisierung der Nachfrage
Effekte regional verteilter sowie Ost-/West-ausgerichteter Solarstromanlagen

Eine Abschtzung systemischer und konomischer Effekte verschiedener Zubauszenarien der Photovoltaik
Ein radikal vereinfachtes EEG 2.0 und ein umfassender Marktdesign-Prozess

Konzept fr ein zweistufiges Verfahren 2014-2017
Ein robustes Stromnetz fr die Zukunft

Methodenvorschlag zur Planung Kurzfassung einer Studie von BET Aachen
Entwicklung der Windenergie in Deutschland

Eine Beschreibung von aktuellen und zuknftigen Trends und Charakteristika der Einspeisung von Windenergieanlagen
Erneuerbare-Energien-Gesetz 3.0
Konzept einer strukturellen EEG-Reform auf dem Weg zu einem neuen Strommarktdesign
Kapazittsmarkt oder Strategische Reserve: Was ist der nchste Schritt?

Eine bersicht ber die in der Diskussion befindlichen Modelle zur Gewhrleistung der Versorgungssicherheit in Deutschland
Klimafreundliche Stromerzeugung: Welche Option ist am gnstigsten?

Stromerzeugungskosten neuer Wind- und Solaranalagen sowie neuer CCS- und Kernkraftwerke
auf Basis der Frderkonditionen in Grobritannien und Deutschland
Lastmanagement als Beitrag zur Deckung des Spitzenlastbedarfs in Sddeutschland

Endbericht einer Studie von Fraunhofer ISI und der Forschungsgesellschaft fr Energiewirtschaft
Negative Strompreise: Ursache und Wirkungen

Eine Analyse der aktuellen Entwicklungen und ein Vorschlag fr ein Flexibilittsgesetz
Positive Effekte von Energieeffizienz auf den deutschen Stromsektor

Endbericht einer Studie von der Prognos AG und dem Institut fr Elektrische Anlagen und Energiewirtschaft (IAEW)
Power-to-Heat zur Integration von ansonsten abgeregeltem Strom aus Erneuerbaren Energien
Handlungsvorschlge basierend auf einer Analyse von Potenzialen und energiewirtschaftlichen Effekten
Stromverteilnetze fr die Energiewende

Empfehlungen des Stakeholder-Dialogs Verteilnetze fr die Bundesrepublik Schlussbericht
Vergtung von Windenergieanlagen an Land ber das Referenzertragsmodell

Vorschlag fr eine Weiterentwicklung des Referenzertragsmodells und eine Anpassung der Vergtungshhe
All publications may be downloaded at www.agora-energiewende.de
45
057/03-CP-2014/EN
How do we accomplish the

Energiewende? Which legislation,
initiatives, and measures do we
need to make it a success? Agora
Energiewende helps to prepare the
ground to ensure that Germany
sets the course towards a fully
decarbonised power sector. As
a think-&-do-tank, we work with
key stakeholders to enhance the
knowledge basis and facilitate
convergence of views.
Agora Energiewende
Rosenstrasse 2 | 10178 Berlin | Germany
T +49 (0)30 284 49 01-00
F +49 (0)30 284 49 01-29
www.agora-energiewende.de
info@agora-energiewende.de
Agora Energiewende is a joint initiative of the Mercator Foundation and the European Climate Foundation.

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Report on the

German power system

057/03-CP-2014/EN Please quote as:

Dear reader, profiles were supposed to serve internal purposes only.

As cooperation starts with mutual understanding, Agora Dr. Patrick Graichen

2 Industry Structure, Ownership and Regulation  7

3 Energy Production and Consumption  13

4 Imports and Exports  17

6 Electricity Balancing/Reserve Markets  27

7 Decarbonisation Policies and German Energiewende  29

10 Grid Infrastructure and Reliability  35

ACER Agency for the Cooperation of Energy Regulators

BKartA Federal Cartel Office (Bundeskartellamt)

Federal Ministry of Economic Affairs and Energy

Federal Network Agency for Electricity, Gas, Telecommunications,

EEG Renewable Energy Act (Erneuerbare-Energien-Gesetz)

ENTSO-E European Network of Transmission System Operators for Electricity

EnWG Energy Industry Act (Energiewirtschaftsgesetz)

ESD Effort Sharing Decision

ETS Emissions Trading System

FiT Feed-in Tariff

GWh Gigawatt Hour

HHI Herfindahl-Hirschman Index

ITO Independent Transmission System Operator

kWh Kilowatt Hour

RES Renewable Energy Sources

Stadtwerke Municipal Utilities

TSO Transmission System Operator

TWh Terawatt Hour

Germany has introduced a transformative energy transi-

2 Industry Structure, Ownership, and Regulation

45 percent of gross electricity consumption in 2025, and 6 bertragungsnetzbetreiber, n.d.

8 Gesetz ber die Elektrizitts- und Gasversorgung

Market Share of German Electricity Companies Table 3

The big 4 distribution

EnBW 56% installed

Ownership share of renewable generation TSO geographic coverage in Germany Figure 2

Private citizens and farmers

Regional/municipal utilities 50Hertz

Big four AMPRION

Statistica, 2014 Enet, 2014; http://www.enet.eu/kartestromnetzbetreiber.html

2% 9% Energy policy in Germany is developed and implemented

On the federal level, the German power sector is chiefly

30,000-100,000 Federal Network Agency (BNetzA): This agency oversees

10 BNetzA, 2013, p. 27. 11 There are 16 Lnder (states) in total.

Ownership Structure of German Energy Companies Table 4

Amprion RWE 25.1%, Commerz Real AG 74.9%*

TransnetBW 100% owned by EnBW

TenneT 100% owned by the state of The Netherland

50Hertz Transmission 60% Elia and Elia Asset; 40% IFM**

E.ON 100% privately owned, 75% institutional; 25% retail investors.

RWE 66% institutional, 13% private shareholders, 15% RWEB.***

EnBW 93.5% owned directly & indirectly by the state of Baden-Wrttemberg

Vattenfall 100% owned by the Swedish government

The federal and state cartel offices and regulatory authori-

3 Energy Production and Consumption

Main Indicators Table 5

Installed capacity 7/2014 in MW (Total: 192 GW) Figure 4

BNetzA, 2015, p.29.

2 Industry Structure, Ownership and Regulation 7

3 Energy Production and Consumption 13

4 Imports and Exports 17

6 Electricity Balancing/Reserve Markets 27

7 Decarbonisation Policies and German Energiewende 29

10 Grid Infrastructure and Reliability 35

Market Share of German Electricity Companies Table 3

Ownership Structure of German Energy Companies Table 4

Main Indicators Table 5

Installed capacity 7/2014 in MW (Total: 192 GW) Figure 4

Electricity Production in 2014 (TWh) Figure 5

Import/Export balance (exports imports) (in GWh, physical flows) Table 6

Physical electricity flows between Germany and neighbouring countries Figure 7

Wholesale electricity prices in Germany, forwards 2007 2014 Figure 8

German energy balancing market Figure 13

Targets of the Energiewende Table 7

Energy productivity in Germany, 1990 - 2013 Figure 15

SAIDIunplanned interruptions, excluding exceptional events Figure 16