European Energy Exchange takes stand on capacity markets

The European Energy Exchange (EEX) has published a position paper discussing the need for, and design of capacity markets in Germany. By publishing such a paper, EEX is making an active contribution to the intense debate, which has been under way in Germany for two years.

In its position paper, the EEX concludes that in a European single market, capacity markets intended to ensure the security of supply in Germany are not needed. However, better use should be made of the existing potential in order to strengthen the market.

EEX Chief Executive Officer Peter Reitz said: "First, it is necessary to further develop the European single market, to implement energy efficiency measures, develop demand flexibility and, in particular, to improve the integration of renewable energies into the energy market. The introduction of a capacity mechanism should only be considered after that – provided there is both a demand for new conventional power
plants and a lack of willingness to invest."

That said, if a capacity market is to be introduced, it has to fulfil minimum requirements to ensure that it does not jeopardise the successes of liberalisation on the European internal market as well as ensuring that any disruption to the tried and tested markets is kept to a minimum: “Trading in or the remuneration for capacities should not have any impact on trading in power on the intraday, spot or derivatives markets. Regulatory
interventions leading to inefficiencies have to be avoided.”

Reitz added that the EEX is convinced that, among the models which are currently being discussed, a decentralised capacity market corresponds to these minimum requirements as closely as possible as it is best
able to support the market forces, provided the right design is selected. In this case, continuous and technology-neutral trading in capacities would lead to an efficient mixture of power-plant technologies, storage facilities or demand-side measures.

The EEX position paper on capacity markets is available here (in German).

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