German minister says cross-border cooperation removes need for utility compensation

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Rainer Baake, state secretary for energy in the German economy ministry, says his government is close to signing an agreement with its "electrical neighbours" - including Sweden and Norway - that would make setting price caps in their markets unnecessary.

The agreement would facilitate common rules allowing price swings in the wholesale power market. In effect it would allow the German government to avoid paying utilities a premium to keep loss-making coal and gas-fired power plants operating and betting on market forces instead.
Rainer Baake
Baake told the Eurelectric conference, “Our conviction is whatever our neighbours decide will have an impact – so we invited all our electrical neighbours to discuss the issue very intensely and we are close to signing an agreement.”

“Right now we have huge overcapacities- but that will disappear and we have to then ask the question; what do we do when there is intermittency during peak demand? We don’t want to see price caps and if we work within an internal market we have to define common rules to make sure that in times of scarcity there is no intervention. There are a whole load of provisions for flexibility we can introduce. Every country must decide on its own energy market but if we work together we will save our consumers a lot of money.”

“Minister (Sigmar) Gabriel has said and I repeat – we want to develop this with our neighbours within the construct of the EU’s single energy market strategy.”

The news will come as a blow to Germany’s larger utilities who had lobbied for a capacity market funded by the public to compensate them for keeping loss-making power plants on-line as backup, when intermittent renewable power fails to provide.

On Monday at the same conference, EON chief Johannes Teyssen had urged the government to take that direction, but the government has long been opposed to compensation for fossil power generators.

Germany shares borders with nine countries and is linked to the Nordic region via power cables, which means that its pricing policies have to be accepted and shared by neighbours that will be affected.

The minister said that Germany was more ambitious on decarbonisation targets than Europe in general, although acknowledging mistakes had been made since pursuing the Energiewende strategy. While Europe agreed in October on cutting greenhouse gases by 40 per cent while increasing renewables share of the power mix to 27 per cent and increasing energy efficiency by 27 per cent, he said Germany had lobbied for a 40:30:39 ratio.

“Europe is all about compromises but we are all moving in the right direction even if at different speeds. Germany wants to be a front runner- we already have a 28 per cent share of renewables in our power system.”

“It’s been a learning processes since 2000 when we didn’t know what technologies would work in Germany but put them all on the same starting line – geothermal didn’t work and while biomass was quite a success story we got into conflicts with nature conservationists. Two clear winners have emerged in wind and solar- the learning curve has been expensive with mistakes made however within 15 years- we now know how to produce electricity form new windmills and solar at same level as fossil fuel generators.”



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