The European Commission has approved Germany's plans to put in place an electricity generation capacity scheme aimed at ensuring sufficient capacity in Southern Germany.
The Network Reserve plan “maintains security of supply without unduly distorting competition in the single market” and is therefore compliant with EU state aid rules, the EU Commission said in late December.
“The Commission considers that the Network Reserve constitutes a type of strategic reserve and hence a capacity mechanism” it said, adding that its 2014 Energy and Environmental Aid Guidelines allow member states to put in place such measures under certain conditions.
“The Commission has found that in the case of Germany, state intervention is necessary in view of severe internal congestion in the German electricity grid that prevents sufficient power flows from Northern to Southern Germany” the EU Commission said.
It added however that the measures are to be only temporary through June 2020 as “Germany has committed to undertake substantial investment in its grid infrastructure to relieve the congestion and ultimately make the Network Reserve redundant.”
Scheme may involve power plants in foreign markets
Germany notified in July 2016 to the Commission its plans for paying power plants to establish a Network Reserve, in order to assess their compliance with EU state aid rules.
Under the scheme, German transmission system operators pay operators of power plants that have notified their intention to close down but that are relevant to keep the electricity system in balance, for remaining available to the network.
Power plants in foreign markets, such as Italy and Austria, can participate and if contracted, may be required to increase or decrease production to keep the grid in balance if so instructed by the transmission system operator, the EU Commission explained.
The domestic German power plants are granted a cost-based remuneration, whereas the foreign plants are selected on the basis of a call for interest.
The German energy regulator Bundesnetzagentur has estimated the costs of the Network Reserve to amount to Eur126 million in 2016. The transmission system operators can pass these costs on to network users via the network tariffs, the EU Commission said.
Meanwhile, in order to remove the necessity for the Network Reserve in the future, Germany is to implement a number of additional measures to improve congestion management by the transmission system operators, the Commission explained. In particular, Germany committed to support the review of bidding zones undertaken by the European Network of Transmission System Operators for Electricity (ENTSO-E) and to take into account its outcome, including the possibility of different bidding zones within one Member State, the Commission said.