Market participation of renewable energies should not be for its own sake – EU-wide overview
As the share of electricity production from renewable energies increases, the pressure is rising to integrate these energies in the market rather than conduct their production outside the competitive electricity market. The new German Renewable Energy Sources Act (EEG) also offers different instruments – e.g. the “optional market premium” – for this purpose.
In the case of fluctuating renewable energies such as wind and solar energy in particular, market integration only seems to make sense when the power plants can actually react flexibly to prices and demand. Thus the form of market integration has to be geared to the flexibility of these power plants. In addition the markets have to be developed to the extent that wind and solar power plants can operate within them. In the EU there is a large range of relevant support instruments and market developments. These are the key results reached by Oeko-Institut’s experts, who were given the task by the EU Commission of analysing how renewable energies are currently integrated in the electricity markets of the EU member states.
“For renewable energies to have a reasonable opportunity on the energy markets, these markets have to be designed in a way which facilitates this,” says Dierk Bauknecht, project leader at Oeko-Institut. “They have to make it possible to be able to react very quickly in order to accommodate the fluctuating availability of, for example, wind energy.” Therefore, in addition to the balancing market which already takes account of fluctuations, a so-called intraday-market is needed, enabling short-term trading. However, that is still a long way off in over half of EU member states. If the market were designed in such a way, it can make a greater contribution to solving the problem than mandatory participation of renewable energies in these markets.
As a result the experts also addressed the question of whether there would have to be an obligation for renewable energies to participate in the energy markets, as is the case in some EU member states. The new German Renewable Energy Sources Act (EEG) allows, for instance, the choice between a fixed payment – i.e. the EEG levy on the quantity of electricity produced – and voluntary market participation. If participation is obligatory, it should not apply to all power plants. In the UK, for example, only large power plants producing renewable electricity participate in the market; smaller power plants receive financial support that is similar to the German EEG.
“It is particularly problematic when small power plants, whose production is difficult to predict, are subject to the full forecasting risk when the wind availability is not as expected,” says Bauknecht. It should not be a priority in the further development of the support instruments that renewable energies bear the consequences when their electricity production is different than predicted. The EU-wide overview shows a number of mechanisms, by means of which this risk can be lessened for wind and solar power plants.
The RES Integration project addressed network integration in addition to market integration. Oeko-Institut’s project partner, Eclareon, analysed the barriers to network integration of renewable energies and how these can be surmounted. This analysis covered questions related to network connection, access, and expansion for the 27 EU member states. In the process the experts addressed the question of how the costs of network connection are distributed, the conditions under which feed-in is not possible (e.g. due to bottlenecks) and power plants are intermittently removed from the network, and how network expansion is regulated.
Further information to download
Final report of the RES Integration research project conducted by Oeko-Institut and Eclareon
Contact
Dr. Dierk Bauknecht
Senior Researcher
Energy & Climate Division
Oeko-Institut, Freiburg Head office
Tel: +49 761 45295-230
Email: d.bauknecht@oeko.de
Oeko-Institut is a leading independent European research and consultancy institute working for a sustainable future. Founded in 1977, the institute develops principles and strategies for ways in which the vision of sustainable development can be realised globally, nationally and locally. It has offices in three cities in Germany: Freiburg, Darmstadt and Berlin.
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