2015 outlook: Germany to decide on new market design in 2015

Germany will resume devising a new electricity market design in 2015, but this is unlikely to lead to any regulations that would change the bearish trend on the wholesale power prices.

In Austria, struggling co-generaton plants may benefit from a new support scheme whereas in Switzerland, the parliament´s discussions over nuclear phaseout will continue to disquiet the nuclear power sector.

Germany´s public consultation on the new power market design, based on the green paper published in October, will end in March.

In the end of May the government is due to publish a white paper with concrete proposals. After a public consultation on these, expected to last until September, new legislation for shaping the power market will follow.

The government indicated in its green paper that it does not favour the introduction a capacity market.

Hence, conventional energy producers, who are struggling due to low wholesale power prices are unlikely to get much relief from the forthcoming legislation.

The year will show whether in such unfavourable market conditions for conventional energy producers, Swedish utility Vattenfall would realise the plan to sell its German lignite mines and lignite-fired power plants, as announced in October.

Conditions for renewable power producers will be less favourable than a year ago as well. The new renewable energy law, which came into effect on 1 August, forces more wind and solar power plants to sell their generation on the market and makes future plants compete for financial support at tenders.

Solar PV pilot tenders will be launched first, with the first calls for proposals expected this year, but the publication of the draft tender design has been delayed.

The German ministry of economics said in November that the draft design was to be published in a couple of weeks, but this is yet to happen, possibly due to the criticism that the draft received when it leaked in autumn.

Bearish outlook

Despite less favourable conditions, the growth of installed renewable energy capacity is expected to continue in Germany.

This, in combination with bearishness on the coal and gas markets, led traders to believe that wholesale power prices are likely to continue their downward trend in 2015.

The hopes of price stabilisation that some voiced a few months ago have largely disappeared.

The European carbon market reform could possibly bring some bullishness to the forward curve, but it is not yet set when the reform would come into force and how big impact it would have on prices.

Austria

Since the Austrian power market is dependent on its larger German counterpart, it faces a similar bearish outlook for 2015.

Austria’s struggling combined heat and power (CHP) generation plants may receive some help in case the EU gives a green light to the new CHP support scheme approved by the Austrian parliament last year.

Germany also plans to review its CHP law but it is too early to tell whether this will lead to more support for co-generation plants.

Switzerland

Switzerland’s parliament is to resume discussions about the country’s 2050 energy strategy and nuclear phaseout this year.

It remains to be seen whether the two houses of parliament can reach an agreement on the strategy before 2016.

The government hopes that in the longer run nuclear power can be replaced by growing wind and solar power capacity despite its plan to cut renewable energy subsidies. Laura Raus