Fraunhofer study: New electricity market design finances the energy turnaround and secures supply

In order to achieve the climate targets, the new German government has stipulated in its coalition agreement that renewable energies should account for 80 percent of gross electricity demand in 2030. The system, which has been geared to fossil fuels up to now, must therefore increasingly adapt to renewable energies – especially to high volumes from fluctuating sources such as the sun and wind. Although these reduce the price of electricity on the stock exchange, there is no economic basis and thus no basis for the further expansion of renewable energies. In addition to removing market barriers to the expansion of renewables, a key lever is incentives to make electricity supply and demand more flexible. In addition to economic aspects, the study also considered business aspects for the generation of renewable energies as well as the required flexibility options in the consumer, storage and generator sectors. As a result, it shows that the energy turnaround in the electricity sector can be organised predominantly by using regional value creation potentials.

“One of the special features of the study is the analysis of a business case for renewables and the flexibility options needed for the energy system of the future. It represents an important path to the implementation of climate neutrality, which at the same time can significantly reduce the dependence on imports of energy raw materials and electricity and also fulfils the requirements of security of supply and securing the location through predominantly domestic value creation. A secure energy supply is guaranteed at all times – even in the event of an early coal phase-out by 2030. We are already providing a comprehensive proposal for the Climate Neutral Electricity System platform planned by the new German government. The study was accompanied by an intensive discourse with associations, renewable energy companies, grid operators and electricity traders. At the same time, their submission underlines that the renewable sectors now want to take responsibility for the overall system,” said BEE President Dr. Simone Peter.

“The study models the complex relationships between very high wind and photovoltaic output, investments in flexibility options, electricity pricing and electricity grids. For this, a permanent reflection with the various experts in the participating institutes as well as via numerous workshops with the BEE and the renewable industry was essential. The study evaluates how the challenges of the extremely high expansion dynamics of renewable energies demanded in the coalition agreement can be solved and addresses in particular the points of market design and target power grid”, says Norman Gerhardt, group leader energy economics and system analysis of the Fraunhofer IEE in Kassel.

A team from Fraunhofer ISE shed light on the role of end consumers: “On the one hand, their flexibility must support the integration of fluctuating renewable energies, but at the same time this flexibility must also be attractive for end consumers. We have shown how the reform proposals affect the end consumer and his potential flexibility provision,” explains Dr. Jessica Thomsen, Team Leader Energy Supply and Markets at Fraunhofer ISE.

Download the study