Germany needs to introduce a capacity market to create incentives for the construction of 10GW of new gas-fired power generation capacity by the time country shuts down its last nuclear reactors in 2022, German new entrants association BNE has said.
“New, flexible and quickly adjustable gas-fired power stations need to be built on a large scale from 2022 at the latest to ensure energy supply in Germany,” BNE said.
“But under current market conditions, new gas-fired power plants are just not profitable,” it said.
Berlin-based BNE represents companies in the electricity and gas retail sectors that have to use third-party transmission networks to supply their customers.
The association commissioned consultancy BET to compile a study into whether the current electricity market design is sufficient to ensure security of supply. A capacity market is the best solution to ensure that investors build the capacity where needed, the study concluded.
The additional capacity would be needed on only a few days of the year but “then immediately and completely” to fill the gap left by the nuclear plants and to balance intermittent renewable energy.
The study proposes to establish a neutral co-ordinator to monitor if and where new capacity is needed.
The co-ordinator should then, in a second step, auction future capacity permits for new generation sites, focusing on technologies that can be efficiently integrated with volatile renewable energies and on regions with the greatest need for additional generation capacity.
The use of demand-side management, retrofitting idled fossil fuel power plants and power storage facilities, could also form part of Germany's path into the renewable energy age, the association said.
The capacity market would only incentivise the construction of new power plants rather than their day-to-day operation, BNE said, arguing that this would ensure the continuance of a liberalised and fully functioning over-the-counter (OTC) wholesale market.
Federal minster for economics and technology and vice-chancellor Philipp Rosler in July said the government is evaluating the necessity of a capacity market carefully. But he added that a regulatory framework introducing such a market would be likely to favour certain types of power stations over others.