IERN International Energy Regulation Network

The German wholesale electricity and generation markets are largely privatised; to some extent the federal states and local authorities hold shares.

Since Germany is a net exporter of electricity and import plays only a minor role anyway, domestic generation of electricity is of great importance for the supply of electricity. Of this generation a share of approximately 60 percent falls to the two large energy supply companies E.ON and RWE. Including Vattenfall and EnBW, this share increases to approx. 90 percent. The share is similar when it comes to the transport of electricity at high voltage level. The remaining competitors, that together amount to approx. 10 percent of the electricity generated in Germany, are not important competitors since this market volume is spread across a multitude of often regional and local electricity suppliers.

Net electricity generation of the whole electricity industry was 596.1 TWh (public supply 504.2 TWh, industrial generation 46.8 TWh and private feeds 45.1 TWh) in 2006 with the following percentages by type of production: nuclear 26.6%, lignite 23.4%, hard coal 20.9%, natural gas 11.9%, renewables with hydropower and wind 13%, mineral oil products 1.6 % and other 2.5%.

For the reporting periods 2007 to 2016, the share of the overall planned investments in electricity generating capacity for power plants offering “public supply” with a net maximum capacity of at least 20 MW (incl. partial plant expansion) stands at approx. 28.6 percent (approx. 29.3 GW as of April 2007) of the overall net maximum capacity for “public supply”, which amounts to 102.6 GW in 2006. Also, there are (as of April 2007) company-internal approvals for approx. 9.7 GW only and company-external approvals (by authorities) for approx. 7.8 GW. The sum total of actual projects under construction is approx. 7.1 GW. However, no distinction was made here between replacement investments and additional net capacity. The increase in installed net generating capacity slowed down from approx. 1.7 GW in 2005 to approx. 0.6 GW in 2006.

While the trading volume of the European Energy Exchange (EEX) spot market increased only slightly in 2006, the futures market and in particular the OTC clearing at EEX recorded considerable increases in their trading volumes from 2005 to 2006. The rate of increase in the volume of trading on the spot market was 3.2%, on the futures market 49.3% and in OTC clearing 156.2%. The electricity prices in the wholesale segment have risen once more in 2006. The annual mean averages of the Phelix-Day-Base and the Phelix-Day-Peak increased by 10.5 and 14.0 percent respectively, compared to 2005. The annual mean averages of the Phelix-Base-Year-Futures and Phelix-Peak-Year-Futures for the following year have increased by 33.7 and 44.2 percent respectively, compared to 2005.

The German transmission system operators (TSOs) are largely privatised; to some extent the federal states and local authorities hold shares. The German distribution system operators are privatised to some extent and the federal states and local authorities hold shares to some extent.

On 13 July 2005 the Second Energy Statutes Reorganisation Act took effect in Germany with a comletely reworked Energy Industry Act (EnWG). The objective of this Act is to establish non-discriminatory third-party network access as well as fair and efficient network charges while at the same time offering a secure, cost-efficient, consumer-friendly, efficient and environmentally sustainable grid-based supply of electricity and gas to the general public. The EnWG deals in particular with the regulation and unbundling of network operations on the electricity and gas market. Regulatory responsibilities are split distributed among the Federal Network Agency for Electricity, Gas, Telecommunications, Post and Railway (Bundesnetzagentur für Elektrizität, Gas, Telekommunikation, Post und Eisenbahnen, or Bundesnetzagentur) and the regional regulatory authorities in each of the federal states.

The German electricity transmission network is divided into four control areas. The four German transmission system operators (TSOs) are E.ON Netz GmbH, RWE Transportnetz Strom GmbH, Vattenfall Europe Transmission AG and EnBW Transportnetze AG.

There is presently no need to declare congestion at domestic lines within Germany. The German TSOs currently prevent the development of congestion in their networks by employing network and market related measures (so-called topology measures and redispatching, i.e. switching in the network and short-term changes in the regional distribution of the power plant feed-in). However, the predicted development of the German power generating market over the next few years, which is likely to see both the additional construction of new conventional power plants as well as the construction of onshore and offshore windfarms, will require an expansion of the transmission system and related planning.

In addition, there are 877 distribution network operators (as of 21 June 2007).

The network charges for household customers with an annual consumption of 3,500 kWh p.a. have declined from an average of 7.30 ct/kWh (1 April 2006) to approx. 6.34 ct/kWh (1 April 2007). This equals a reduction of approx. 13 percent. This reduction is a result of the cuts in network charges made in the regulatory authorities’ first round of approvals. These approvals were the first decisions ever made by the regulatory authorities on the applications of grid operators in Germany. The reduction of costs applied for led to a considerable decrease of the share of the network charges in the retail price of electricity. However, due to the increased costs of procuring electricity plus the supply margin, levies and taxes, the reduction in network charges caused by regulation has, with the exception of industrial customers, only resulted in a more moderate price increase rather than an actual price reduction. By regulating the network charges, the prerequisites for the development of an electricity market characterised by competition were improved.

The average interrupt rate (System Average Interruption Duration Index, SAIDI) is 19.3 minutes per final consumer and year for unplanned interruptions (and a corresponding 13.4 minutes for planned interruptions).

The EnWG imposes on TSOs and distribution system operators (DSOs) that are part of a vertically integrated undertaking the requirement to be independent, at least in terms of their legal form (legal unbundling), organisation and decision-making (functional unbundling), from other activities not related to transmission or distribution. DSOs with more than 100,000 customers had to implement the legal unbundling provisions by 1 July 2007, while integrated electricity and gas undertakings serving fewer than 100,000 connected customers are completely exempt from the legal and functional unbundling provisions.

In addition to having to comply with the measures for legal and functional unbundling, electricity and gas undertakings have to keep separate accounts internally for each of their transmission and distribution activities (unbundling of accounts). TSOs and DSOs have to implement measures to preserve the confidentiality of commercially sensitive information (informational unbundling). The EnWG allows no exemption from the accounts and informational unbundling provisions.

Small isolated systems are exempt from all unbundling provisions.

The unbundling process has been continuing steadily in the report period 2006. The unbundling requirements have been structurally implemented at transmission system level. There are still issues to be resolved in the area of functional unbundling and informational unbundling at all network levels, despite a large-scale implementation of measures for legal unbundling and unbundling of accounts.

The German market for the retail supply of electricity is privatised to some extent with shares being held by the federal states and local authorities.

The three largest companies supplied a total of approx. 239.1 TWh to final consumers in 2006. This is equivalent to a share of approx. 45.1 percent of the total net electricity consumption of at 530.5 TWh in the year 2006, withdrawn from the “public supply” grid. The indicated shares of the three largest companies related to the volumes provided to final consumers are reference values only.

Since enactment of the Energy Statutes Reorganisation Act (Federal Law Gazette Part I no 24 of 28 April 1998) on 29 April 1998, the German electricity market is fully liberalised.

The overall change of supplier ratio of 9.41 percent for electricity TSOs and DSOs is the result of comparing the recorded overall amount of changes of supplier (45.41 TWh) with the total amount withdrawn by final consumers at the electricity TSOs (39.26 TWh) and DSOs (444.32 TWh), which amount to a sum total of 483.58 TWh.

The current average retail price level (prices as at 1 April 2007) incl. all taxes and levies was: approx. 11.0 ct/kWh (producing sector) for industrial customers; approx. 18.9 ct/kWh (producing sector) for commercial customers; approx. 20.1 ct/kWh (general prices, general tariff) and approx. 19.9 ct/kWh (beyond universal supply), respectively for households.

The tariff approval for final customers based on section 12 of the German Electricity Rate Schedule expired on 30 June 2007, as this regulation ceased to have effect at this point. Since then electricity retail prices are not subject to regulatory approval, but to the control of anti-competitive practices by the Cartel Offices.

With regard to the total amount of electricity supplied to households under section 3 no. 22 of the EnWG the share that was supplied to households under the terms and conditions for general prices (general tariffs), was found to be approx. 55.5 percent in 2006.

The German market for the wholesale supply of gas is largely privatised; the federal states and the local authorities hold shares to some extent.

E.ON Ruhrgas AG, the largest German gas importing company, has a share of well over 60% of total gas imports.

The biggest natural gas production companies in Germany in 2006 were Exxon Mobil (48%), Royal Duch Shell (23%) RWE (12%), Gaz de France (9%) and BASF (8%).

Given the current reserves, a static lifetime of 12 years is assumed for Germany. In 2006, around 17,6% of natural gas consumption have been produced in Germany. Main imports coming from the following countries (share of natural gas volumes in percentages in brackets): Russia (34%), Norway (25%), the Netherlands (20%).

The liquidity of the German gas market is still low. One of the contributing factors in the period under review was the high concentration at import level. Another cause for the lack of liquidity was the foreclosure of the market for supplying regional and local traders and suppliers. As a rule, the gas import companies had signed agreements with regional and local dealers and suppliers (especially municipal utilities), in which long-term contracts with high fulfilment of demand were signed. The Federal Cartel Office has taken action against these long-term contracts in the reporting period by instituting proceedings against the wholesalers on the grounds of anti-competitive conduct. In these proceedings the Federal Cartel Office has also stipulated those combinations of contract duration and supply amounts that it would consider permissible under cartel law for any future supply contracts.

From 2 July 2007 both the gas trade on the spot market (day ahead) and the futures market trade will be included in the EEX, the German power exchange.

The German TSOs are largely privatised; the federal states and the local authorities hold shares to some extent. The German distribution system operators are privatised to some extent and the federal states and the local authorities hold shares to some extent.

In Germany there are some 22 TSOs (definition: self-assessment) and some 719 local operators (as of 22 June 2007 - 4 out of 719 DSO have also been counted as TSO).

The network charges for household customers with an annual consumption of 23,269 kWh p.a. have declined from an average of approx. 1.35 ct/kWh (1 April 2006) to approx. 1.19 ct/kWh (1 April 2007). This equals a reduction by approx. 12 percent. This reduction is a result of the cuts in network charges made in the regulatory authorities’ first round of approvals. These approvals were the first decisions ever made by the regulatory authorities on the applications of grid operators in Germany. Network charges reported above do not yet reflect total cost of networks since part of TSO network costs cannot yet be separated from gas procurement costs. Due to this, network charges appear to be too low while gas procurement costs appear to be too high. The reduction of network costs applied for led to a considerable decrease of the share of the network charges in the retail price of gas. However, due to the increased costs of procuring gas plus the supply margin, levies and taxes, the reduction in network charges caused by regulation has, with the exception of industrial customers, only resulted in a more moderate price increase rather than an actual price reduction. By regulating the network charges, the prerequisites for the development of a gas market characterised by competition were improved.

The information provided by network operators in terms of capacity shows that there are contractual bottlenecks, as had already been apparent in last year’s survey. This applies in particular to feed-in capacity at the borders. Another fact that becomes obvious is that congestion management is currently only applied to a very small degree. This applies to the secondary market as much as to auctions in case of contractual bottlenecks and the withdrawal of capacity (“use it or lose it”). By integrating the networks within the market areas, the situation regarding exit capacity should be eased in the future. The availability of import capacities and market area coupling capacities, which are critical to the liquidity of the trade markets within the market areas (virtual points), still requires improvement.

The use of standard load profiles for handling gas supplies has not yet been implemented by approx. 73 percent of the local distribution system operators. Given the fact that the use of a standardised load profile is one of the main prerequisites for ensuring a change of supplier in a way suitable for bulk business, the Federal Network Agency calls on network operators to implement their statutory obligation for the use of standard load profiles without delay.

Considerable progress was made in the area of balancing. Particularly noteworthy are the areas of nomination and basic balancing. However, the information provided as regards extended balancing and flexible services is incomplete, and greatly varying price gaps when pricing different quantities and the area of control energy are critical.

As regards unbundling and basic regulatory information, please see the remarks for the electricity market.

The German market for the retail supply of gas is privatised to some extent with shares being held by the federal states and local authorities.

The three largest companies supplied a total of 317.36 TWh to final consumers in 2006, which equals a market share of 30.87 percent of the total gas consumption of 1028.1 TWh in the year 2006. The indicated shares of the three largest companies related to the volumes provided to final consumers are reference values only.

Since enactment of the Energy Statutes Reorganisation Act (Federal Law Gazette Part I no 24 of 28 April 1998) on 29 April 1998, the German gas market is 100% open.

According to information from the gas network operators recorded in the monitoring activities of the Federal Network Agency, the total volume of change of supplier by final consumers in 2006 amounted to 11.74 TWh. In relation to the overall gas supply, 2006 saw a supplier change ratio of 1.25 percent.

The current average retail price level (prices as of 1 April 2007) incl. all taxes and levies was: approx. 4.23 ct/kWh for industrial customers; approx. 5.74 ct/kWh for commercial customers; approx. 6.57 ct/kWh (general prices, general tariff) and approx. 6.25 ct/kWh (beyond universal supply), respectively for households.

With regard to the total amount of gas supplied to households under section 3 no. 22 of the Energy Industry Act the share that was supplied to households under the terms and conditions for general prices (general tariffs), was found to be approx. 41.1 percent in 2006.

Competition in the gas markets has not much improved in 2006. Comprehensive competition covering all levels of supply was found to be inadequate. Households and small customers were effectively still not able to freely choose their gas supplier.

Gas retail prices are not subject to regulatory approval, but to the supervision of anti-competitive practices by the Cartel Offices.

The following is a selection of important laws and ordinances relevant to the energy sector; it is not an exhaustive list and is available here (in German only)

Second Energy Statutes Reorganisation Act (Zweites Gesetz zur Neuregelung des Energiewirtschaftsrecht, or EnWG) (07.07.2005)
Electricity Network Access Ordinance (Verordnung über den Zugang zu Elektrizitätsversorgungsnetzen, or StromNZV) (25.07.2005)
Electricity Network Charges Ordinance (Verordnung über die Entgelte für den Zugang zu Elektrizitätsversorgungsnetzen, or StromNEV) (25.07.2005)
Gas Network Access Ordinance (Verordnung über den Zugang zu Gasversorgungsnetzen, or GasNZV) (25.07.2005) Gas Network Charges Ordinance (Verordnung über die Entgelte für den Zugang zu Gasversorgungsnetzen, or GasNEV) (25.07.2005)
Incentive Regulation Ordinance (Verordnung über die Anreizregulierung der Energieversorgungsnetze, or ARegV) (29.10.2007)
Ordinance on Universal Electricity Supply (Verordnung über Allgemeine Bedingungen für die Grundversorgung von Haushaltskunden und die Ersatzversorgung mit Elektrizität aus dem Niederspannungsnetz, or StromGVV) (08.11.2006)
Ordinance on Universal Gas Supply (Verordnung über Allgemeine Bedingungen für die Grundversorgung von Haushaltskunden und die Ersatzversorgung mit Gas aus dem Niederdrucknetz, or GasGVV) (08.11.2006)
Ordinance on Low Voltage Connection (Verordnung über Allgemeine Bedingungen für den Netzanschluss und dessen Nutzung für die Elektrizitätsversorgung in Niederspannung, or NAV) (08.11.2006)
Ordinance on Low Pressure Connection (Verordnung überAllgemeine Bedingungen für den Netzanschluss und dessen Nutzung für die Gasversorgung in Niederdruck, or NDAV) (08.11.2006)
Ordinance on Grid Connection of Power Plants (Verordnung zur Regelung des Netzanschlusses von Anlagen zur Erzeugung von elektrischer Energie (Kraftwerks-Netzanschlussverordnung), or KraftNAV) (30.06.2007)
Ordinance on the Fees and Disbursements for official acts of the Federal Network Agency according to the EnWG (Verordnung über die Gebühren und Auslagen für Amtshandlungen der Bundesnetzagentur nach dem Energiewirtschaftsgesetz, or EnWGKostV) (14.03.2006)
Renewable Energy Sources Act (Gesetz für den Vorrang Erneuerbarer Energien, or EEG) (21.07.2004)
Gas and Electricity Concession Fees Ordinance (Verordnung über Konzessionsabgaben für Strom und Gas, or KAV) (09.01.1992)
Competition Act (Gesetz gegen Wettbewerbsbeschränkungen, or GWB) (15.07.2005)
Greenhouse Gas Emissions Trading Act (Gesetz über den Handel mit Berechtigungen zur Emission von Treibhausgasen, or TEHG) (08.07.2004)
Electricity Tax Act (Stromsteuergesetz, or StromStG) (24.03.1999)
Mineral Oil Tax Act (Mineralölsteuergesetz, or MinöStG) (21.12.1992)
– Combined Heat and Power Act (Gesetz für die Erhaltung, die Modernisierung und den Ausbau der Kraft-Wärme-Kopplung, or KWKG) (19.03.2002) – Energy Security of Supply Act (Gesetz zur Sicherung der Energieversorgung, or EnSG) (20.12.1975)