Electricity market

The power system in Germany is undergoing major transformations. Renewable energies (RE) reached a share of 45% of Germany's gross power consumption in 2020; in 2011, this share was still 20%. The share of RE will continue to grow strongly according to political targets. The increasing share of renewables in the power system is reflected, among other things, in the decrease of the residual load. The residual load is the share of power demand that is covered by conventional power plants. The expansion of renewable energies is accompanied by the retirement of conventional power plants. As a result of the phase-out of nuclear and coal-fired power plants, a total of 25 GW of installed capacity from conventional, dispatchable power plants will exit the power market between 2021 and 2030.

Load duration curve and capacity of coal-fired and nuclear power plants in Germany

The Merit Order in the power market shows the deployment ranking of different power plants, ordered by ascending marginal costs. The marginal costs are mainly composed of fuel and transport costs, as well as the costs for the procurement of CO2 certificates. Using individual power plant parameters such as the efficiency, the internal Team Consult Merit Order Model determines the marginal costs of power production for each power plant.

Team Consult’s Merit Order Model calculates the power plant-specific marginal costs, lists the power plants in ascending order of marginal costs and shows the cumulative power plant capacity.

Merit order of the German power plant fleet during summer, as of 2021

Since conventional power plants provide the increasingly fluctuating residual load in the power system, they are required to operate in an increasingly flexible mode. The utilization of power plants is mostly brokered through the power exchange, where the demand for electricity is matched with supply, taking into account marginal costs.

The stability of the power system is ensured by the transmission system operators. To this end, transmission system operators have a number of measures at their disposal. These include re-dispatch of power plants and curtailment of renewable energies. The use of these interventions has increased significantly in recent years. In addition, transmission system operators can procure control energy from other market participants to ensure the balance in the power system. The total tendered capacity of control energy products has fallen from 11 GW in 2009 to around 7 GW in 2020.

Re-dispatch and curtailment (left) and Tendered control energy products (right) in Germany

In this dynamic market environment, we support the various participants in adapting their business activities to current developments in the power market.

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Current developments of photovoltaic power generation in Germany

December 2022

In the ‚Easter Package’ bill, the target of a renewable share of 80 % in 2030 (2021: 42 %) of the gross power consumption was defined, which requires an acceleration of photovoltaic capacity expansion. The new expansion path states an addition of newly installed capacity of 7 GW in 2022, which then increases up to 22 GW/a in 2026 and will then remain constant at this level. The new total expansion target of installed capacity is now 215 GW by 2030, which compared to the old target (98 GW installed capacity until 2030) is more than double. Considering the expected dismantling of 5 GW until 2030, a gross addition of 156.1 GW is needed by 2030, which is approximately 2.5 times the current installed net nominal capacity.

In 2022, in total 5.2 GW net nominal capacity was installed in Germany. The bigger share of 3 GW (58 %) was installed on roofs while the remaining share of 2.2 GW (42 %) was ground-mounted. The target of a capacity addition of 7 GW this year was not achieved (degree of target fulfillment: 74 %). The figure below gives a brief overview of the past few months, where the target, broken down to monthly values, was not reached in one single month.

The ‘Easter package’ bill states that the addition path should be evenly split between roof and ground-mounted Photovoltaic. For planning new roof Photovoltaic in general, an announcement to the Federal Network Agency is not needed while an announcement for ground-mounted Photovoltaic is usually needed. Currently, 0.6 GW of newly installed ground-mounted Photovoltaic capacity is planned for 2023, which is equal to approximately 13 % of the needed addition. It’s an open question, whether the net addition target of 9 GW of PV capacity will be achieved in 2023.

To support the increased addition path of Photovoltaic capacity, various measures were proposed. Among other things, the payments for roof Photovoltaic outside of the regular tenders were increased as well as further area categories were introduced (agri-, Floating-, and swamp-Photovoltaic), which under certain circumstances can get higher subsidies.

Whether or not these measures are sufficient to reach the intended yearly capacity additions, only the next few years will show.