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Maintaining Competition: Creating Efficient Incentives for Guaranteed Capacities within the German Electricity Market

Hubertus Bardt, Esther Chrischilles


The promotion of renewable energies has to be reformed fundamentally in order to integrate emission-free technologies into the market as early as possible. Without such a reform, competition in the power market is threatened to be increasingly pushed back. Without competition, however, it will not be possible to increase innovation and efficiency, which are indispensable for a successful energy turnaround. In addition to promoting renewable energies, it is important to further develop the current electricity market. In this context it might also be necessary to include a pricing mechanism of security of supply through which backup capacities can be co-financed. The proposed model of an integrated options market is based on existing structures of the electricity market. It provides a framework for a gradual and evolutionary adjustment to new generation structures. For renewable technologies, a temporary support mechanism is recommended where a surcharge is paid by auction and in reference to the market outcome.

Hubertus Bardt is member of the management board of the Cologne Institute for Economic Research and head of Research Unit Environment, Energy, Resources. Esther Chrischilles is economist of the research unit Environment, Energy, Resources at the Cologne Institute for Economic Research. The authors wish to thank Cristina Juan-Schmidt-Brücken for her assistance with the translation of this article.

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