Electricity Market Design 2030: Effective and Efficient Funding of Renewable Energy (Impulse)
A target has been set for 80% of electricity to come from renewables by 2030. The expansion of renewables is crucial not only for climate protection but for achieving independence from fossil fuels and individual export countries. By revising the Renewable Energy Act, the German federal government hopes to move forward with this expansion and also adapt the design of the electricity market to the needs of our time.
However, this expansion entails huge costs. The discussion paper “Electricity market design 2030: effective and efficient funding of renewable energy” looks at how we can transition to a market-economy system, where renewables can be efficiently integrated in the market.
Experts from the Academies project ESYS highlight various potential models for shaping this transition, and assess the pros and cons of each. They view the following aspects as crucial:
- Having a market-economy system with a carbon price as the key instrument best fulfils these criteria. The plan is for the transition to be complete by 2030.
- During the transitional period, the carbon price should increase continually and, in parallel, market premium models, such as a fixed or unilateral sliding market premium should be used.
- Both unilaterally sliding premiums and fixed market premiums are suitable for the transitional period, provided they are set by tender. Conversely, they advise against the use of bilateral sliding premiums (contracts for difference) due to their being an inefficient main funding model.
- To achieve the climate targets, other instruments in addition to the carbon price may be useful. However, this discussion paper focuses on the most cost-efficient funding of electricity generation from renewables.
Haucap, Justus/ Kühling, Jürgen/ Amin, Munib/ Brunekreeft, Gert/ Fouquet, Dörte/ Grimm, Veronika/ Gundel, Jörg/ Kment, Martin/ Ketter, Wolfgang/ Kreusel, Jochen/ Kreuter-Kirchhof, Charlotte/ Liebensteiner, Mario/ Moser, Albert/ Ott, Marion/ Rehtanz, Christian/ Wetzel, Heike/ Meinhof, Jonathan/ Wagner, Marlene/ Borgmann, Miriam/ Stephanos, Cyril: “Strommarktdesign 2030: Die Förderung der erneuerbaren Energien wirksam und effizient gestalten (Impuls)“, Akademienprojekt „Energiesysteme der Zukunft“ (ESYS), 2022.