The study “The Order of Transformation – Security of Supply in the Electricity Market” demonstrates how security of supply can be organised in a market-based manner through an effective hedging obligation.
By effectively designing such a hedging obligation, capacity subsidies in the form of capacity markets can be avoided. Capacity markets distort electricity markets by tending to incentivise conventional overcapacity and displace flexibility options. They reduce competition within the internal market, hinder market entry for innovative technologies, risk import dependencies and a fossil-lock-in.
The hedging obligation, by contrast, is technology-neutral and ensures security of supply in a cost-efficient way by effectively incentivising both dispatchable capacity and flexibility options. As the electricity market becomes increasingly flexible, renewable energy sources can be integrated more efficiently, which also reduces support costs.
The English translation of the study can be downloaded here: The Order of Transformation
The study was supported by the following organisations:
BNE Association of Energy Market Innovators e. V.
DIHK German Chamber of Industry and Commerce
EEX European Energy Exchange AG
Background chapter: