Regulation, Competition and Investment in the German Electricity Market: RegTP or REGTP*

Abstract

The German energy industries will be subjected to regulation of network access enforced by a sector-specific regulator. Whereas the gas industry broke the regime of negotiated third party access, in electricity nTPA 'worked', although it clearly resulted in a margin squeeze. The government currently discusses whether to use rate-of-return or incentive regulation, to allow ex-ante approval of charges, and the length of the regulatory lag. Close examination suggests that generation capacity still is adequate, but in the longer term there is reason to be alert. The regulatory changes and emission trading system can both contribute to retain supply security by increasing investment.

Regulating technological change—The strategic reactions of utility companies towards subsidy policies in the German, Spanish and UK electricity markets

“…Yet, within 10 years, a series of mergers in the industry led to the emergence of four dominant utilities that owned assets along the entire value chain-E.ON, RWE, Vattenfall Europe and EnBW. Between them they controlled 90% of the market (Brunekreeft and Twelemann, 2005).…”

Germany’s dash for coal: Exploring drivers and factors

“…Brunekreeft and Twelemann (2004) point out that '[t]he combination of the traditional model of cost-based regulation, incentives to invest in new capital and an obligation to guarantee a reasonable supply security, [had] created severe excess generation capacity in the German ESI [Electricity Supply Industry].' With electricity prices reaching a historic low and even temporarily falling below generation costs in 2000 (Lambertz, 2006), the large integrated suppliers (IS) in particular closed down old and inefficient plants (Brunekreeft and Twelemann, 2004). Even though prices started to rise again from then on, they were sending only tentative signals for new investments.…”

A Review of Liberalization and Modeling of Electricity Markets

“…Germany had to established an independent regulator via the federal Energy The German authorities' lack of concern about market power culminated in the allowance for the EON-Ruhrgas merger that combined the largest vertically integrated electricity and natural gas companies in Germany. Furthermore, Germany has four control areas which leads to inefficient doubling of network services particularly in the balancing markets (see Brunekreeft and Twelemann, 2005;and Riedel and Weigt, 2007). The balkanization within the country hampers efficient crossborder trade since there is no single platform for transaction to and from Germany.…”