Brandt, Robert

Gawel, Erik

Heim, Sven

Korte, Klaas

Lehmann, Paul

Massier, Philipp

Ohlhorst, Dörte

Reeg, Matthias

Schober, Dominik

Schreurs, Miranda

Streuwer, Sibyl

Strunz, Sebastian

Tews, Kerstin

Wassermann, Sandra

Institute of Transport Research:Publications

 Between planned and market economy: How much government intervention does the “Energiewende” need?  Session 1 „Coordinating the Energiewende: Regulatory challenges, trade-offs and responses“   Matthias Reeg1, Erik Gawel2, Klaas Korte2, Paul Lehmann2, Sebastian Strunz2, Robert Brandt3, Dörte Ohlhorst3, Miranda Schreurs3, Sibyl Steuwer3, Kerstin Tews3, Sven Heim4, Philipp Massier4, Dominik Schober4, Sandra Wassermann5  1DLR Institut für Technische Thermodynamik - Systemanalyse & Technikbewertung 2 Umweltforschungszentrum Leipzig (UFZ),  3 Freie Universität Berlin, Forschungszentrum für Umweltpolitik (FFU) 4 Zentrum für Europäische Wirtschaftsforschung (ZEW) 5 Universität Stuttgart, Zentrum für Interdisziplinäre Innovations- und Risikoforschung remaining questions : How much,… of which,… and (until) when… Often confused: goals and measures 1) Setting GOALS Fictional extreme Position No. 1: „100 % RES until 2020: No matter what, because macro-economic costs will otherwise increase even further…“ Fictional extreme Position No. 2: „Renewables? 100%? Never!         It’s technically and economically irrational....and the German industry will be under thread…“ 2) Reaching Goals: INSTRUMENTS (system coordination/incentive mechanisms) 1. Market forces (via competition) 2. Hierarchies (via command & control) 3. Networks (via cooperation) ?  Governance-Continuum • Sustainable evaluation: For efficient and effective achievements of goals the following criteria need to be addressed simultaneously:          Instruments need to be evaluated under the special conditions of the socio-technical system in transition  Economic efficiency (static & dynamic) Environmental protection Security of supply Additional criteria:  Transaction cost efficiency  Adaptive efficiency  Distributional impacts  Social acceptability  Political feasibility  System Complexity (reduction?)  … Classical criteria:  • Research Goals and Approach: 1. Interdisciplinary (economic, sociologic, engineering, policy perspectives…) 2. No prioritization of sub-goals: equality of economic, ecologic and social aspects.   More market or more state? The case of ensuring security of supply (SoS) in Germany Capacity  Mechanisms (CMs) State-based elements (centrally organized) Market-based elements  (decentral organized) • Adaption of existing markets  (e.g. control/balancing) • Introduction of new markets (e.g. capacity markets) • Conditional capacity payments (selective markets) • Strategic reserve   demand defined  by TSOs  central capacity markets:  demand defined by  regulator   definition of technical requirements  definition of demand  and technical requirements  competitive  reserve bidding     decent. capacity markets: via market  participants  competitive   reserve bidding   - CMs stimulate operation of (fossil) back-up power plants but …. … are hard to design, revise or abolish, … fail to address the diverse other options for SoS, … are unlikely to be cost-effective in context of the ‚Energiewende‘  5 Better: a policy mix to provide the security of supply http://damontucker.com/wp-content/uploads/2011/11/smartgrid.jpg Power market:  No power price caps  Market liberalization  Market splitting  Europeanization of security of supply Non-renewable power plants:  Acceleration of permitting  Strengthening of emissions trading Renewable power plants:  Fixed premiums and quotas only partly helpful Demand-side management  Load reduction  Load shedding  Load transfer Grids and storage:  Regulation of grid extension  Design of grid charges  R&D support        Promising avenues for further research:  Designing a sustainable policy mix to secure the supply  Designing deliberative policy processes to cope with uncertainties More market or more state? The case of direct-marketing (DM) of RES-E in Germany  Market Integration Regime State-based elements (centrally organized) Market-based elements  (decentral organized) • Integration via Power Exchange • Integration via load serving entities (LSE) • Support via floating premiums • Support via fixed premiums • Pricing mechanism for monopsons  definition of pricing mechanisms/premiums  definition of min.  VRE-share in portfolio  definition of  premium parameters   definition of  premium parameters   state sets central demand  for RES-E & price  competitive bidding   tradable RECS  market-driven curtailment via (weak) price signals  market-driven curtailment via (strong) price signals  auctions for                  collection of decent. knowledge/information Decentral DM makes sense for dispatchable technologies, but… … not for variable renewable energies (VRE), … not via the central power exchange,  … b/c VRE threatened by high risk premium for cost of capital Better: RES & DM-support policy mix fitting the socio-technological requirements Promising avenues for further research:  Which market risks (price & volume) should (really) be transferred to actors  Designing adequate policy instruments to cope with high uncertainties *w/o Pumped Hydro RES capacity in MW 2004  2005 2006  2007   2008 2009   2010  Development of installed RES-E capacity by  shareholders in Germany in MW* Big 4 intern. utilities project developers citizens/ private persons municipal utilities commerce & industries funds & banks others other power utilities contracting companies farmers/landowners Approx. 80 % of RES-capacity is owned by pps., farmers, pds. & SME  These actor-types ARE USUALLY NOT  ABLE to apply adequate risk diversification measures for DM: • No power market background/experience • Single technology investments  • no portfolio of mixed technologies  leads to high risk premiums for costs of capital for VRE  will increase support costs  although RoE expectations are relatively low for these actor-types  Source:  trend:research (2011)  • Governance system should be designed with respect to the socio-technical system and actors characteristics • Markets are instruments to organize systems, but no goal itself • Power „markets“ have always been subject to strong government intervention (and probably always will be) • In the context of the “Energiewende” neither markets nor government regulation are the most efficient governance approach per se, i.e. no simple solutions à la market-only vs. state-only • Policy mix needed to address diverse sources of market and policy failure • Incentive schemes should dynamically adopt to changing framework conditions How much government intervention does the “Energiewende” need? – Some conclusions Thank you very much in the name of the whole team for your attention…              …Questions?                         Dipl. Ing. Matthias Reeg Telefon 0711/6862-282 | Telefax 0711/6862-8100 | matthias.reeg@dlr.de w ww.DLR.de 

Between planned and market economy: How much government intervention does the "Energiewende" need?

https://elib.dlr.de/120307/1/Vortrag_Market%20vs%20Regulatory-Based_final.pdf

Between planned and market economy: How much government intervention does the "Energiewende" need?

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