Beside its liberalization, the energy sector is affected by other regulatory mecha-nisms that also cause significant changes. This mechamecha-nisms are listed as follows:
the introduction of the CO2-emission trading, the final decision about the phase out of nuclear power plants after the Fukushima Daiichi accident, the introduction of the Renewable Energy Act and the Combined Heat and Power Act.
The first mechanism, the emission trade via CO2-certificates, the so called Euro-pean Union Allowances (EUA), was established in 2005 as a Europe-wide market to fulfill the Kyoto target to reduce the annual CO2-emissions by 8 % until 2012 compared to 19906. To achive its target, the European Union signed the "EU
6The European Union strengthened its target with a self-commitment to 20 % reduction.
2.1. Liberalization of electricity markets and structural changes
Burden Sharing Agreement" that splits the EU targets to fifteen member states7. The member states developed the so-called "National Allocation Plans (NAP)", which contain caps for the number of certificates. The NAPs also allocate CO2 -certificates to different emission sources.
The European Commision decided the allocation of 95 % of the certificates free of charge in the first period (2005-2007) of the emission trade and 90 % of the certificates in the second period (2008-2012) (see Parliament (2003)). Thus, only 5 % of the certificates were auctioned by the member states in the first period.
The price of CO2-certificates declined to almost zero during the second half of the first period, when information spread suggesting the system was overstocked with certificates (see Öko-Institut (2010)).
In the second phase the cap for CO2-emissions is significantly reduced due to the actual NAPs8. For Germany 452 million tons CO2-emissions per year are al-lowed for the plants, which are affected by the emission certificate system, while in the first period the cap amounted to 499 million tons CO2 per year. The Ger-man NAP allocates CO2-certificates to existing power plants that have been in operation before 01/01/2003 based on the average historical emissions of each power plant and a technology based benchmark. That means that the amount of emissions of a power plant e.g. from the period 2000-2005 is considered as basic quantity for the number of allocated certificates. This basic quantity is then ad-justed by the benchmark and is multiplied with the number of years in the second phase of emission trade (see ZuG (2011)). The allocation of CO2-certificates to new power plants only depends on the technology-based benchmark for the ap-propriate technology. For each technology a different benchmark is defined: 365 g/kWh for gaseous fuels and 750 g/kWh for other fuels (see BMU (2006)).
Beside this new allocation plan, the cap for CO2-emissions and thus the total number of CO2-certificates are reduced by more then 10 % in the second phase.
Together with the so-called "banking" enactment, which allows the use of certifi-cates from the second phase also in the third phase, the new cap has lead to more
7Due to this agreement, Germany was obligated to reduce its CO2-emissions by 21 % compared to 1990 (see Commission (2000))
8The NAPs need the permission of the European Commission.
or less stable CO2-certificate prices in the second phase. It can be concluded that the development of the CO2-certificate prices will be one of the main parameters for structural changes in the electricity sector rather in the mid- and long-term than in the short-term.
The nuclear phase out is another regulatory mechanism, which changes the constitution of power plant capacity in Germany. The nuclear phase out, which was firstly decided in 2000, was delayed by the current government in October 2010 extending the operation time of the existing nuclear power plants. However, after the Fukushima Daiichi nuclear disaster, the German government revised the extension of the operating times and decided the immediate shutdown of eight nuclear units, while the remaining nine units have to be shut down until 2022 (see Bundestag (2011)). The nuclear phase out will lead to the planning and construc-tion of new power plants based on coal and gas, if the gap after the total shutdown of nuclear power plants cannot be closed by renewable energy technologies (see Umweltbundesamt (2011)).
The increase of renewable capacity and thus the structural change of the Ger-man electricity sector was boosted by the Renewable Energy Act (in GerGer-man:
"Erneuerbare Eneergien Gesetz EEG") and the Act on Conservation, Modernisa-tion and Extension of Combined Heat and Power (CHP)9. The latter act provides bonuses and incentives for the installation of especially small-scale CHP plants to push decentralized electricity generation. However, the more effective act is the EEG, which ensures fixed feed-in tariffs (FITs) to investors for each unit of elec-tricity produced from renewable energy sources (RES). The German EEG was first established in 2000 and then updated by the amendments in 2004, 2006 and 2009.
The amendments adjust the height of the fixed tariffs depending on the costs and the market penetration of each renewable technology. The dynamic adjustment of the feed-in tariffs for renewable power lead to a strong growth of especially wind power and photovoltaics (see Figure 2.2). The boost in photovoltaics (PV) and thus the increase of necessary financial resources lead to the last amendment of the EEG in June 2012, which significantly reduced the feed-in tariff for PV
elec-9orig.: "Gesetz für die Erhaltung, die Modernisierung und den Ausbau der Kraft-Wärme-Kopplung (Kraft- Wärme-Kopplungsgesetz, KWKG)
2.1. Liberalization of electricity markets and structural changes
Figure 2.2.: Installed capacity and electricity generation of wind power plants and photovoltaics
tricity and limited the funding for photovoltaics to a maximum total capacity of 52 GW10. If this limit is reached, the feed-in scheme for PV shall completely be removed.
The FIT system is funded by the so-called EEG charge that is paid by all elec-tricity consumers, except energy intensive companies. Due to the high usage of FIT (see Table 2.2), the EEG charge had to be raised in 2011 and in January 2013 to guarantee the financing of the RES power. The FITs vary for each renewable energy technology and size and their height is annually reduced by a specific de-gression rate for new installations. Beside the feed-in tariffs, the EEG guarantees the primary feed-in of renewable electricity to the grid at any time. It can be stated that the German EEG is a successful regulation to increase the share of RES power. The feed-in tariff system is now applied by other European countries, e.g. in France, whose RES funding was initially based on a certificate system.
The structural changes in the electricity sector caused by the EEG and other energy policies, such as the establishment of different electricity markets, has lead to new sources of uncertainties. These uncertainties have to be adequately
10Some 25 GW photovoltaics capacity was already installed at the end of 2011 (cp. in 2010 17.3 GW, see BMU (2011)). The PV capacity exceeded the 30 GW mark in August 2012.
11Difference costs are the gap between total RES funding and the income for RES electricity on the wholesale market. These difference costs has to be covered by the EEG charge.
Table 2.2.: EEG funded electricity and funding quantities (source: BDEW (2012))
Year 2007 2008 2009 2010 2011
EEG funded electr. [TWh] 67.1 71.2 75.1 80.7 99.9 Average FIT [ct./kWh] 11.76 12.67 14.36 16.35 17.15 Total RES funding [bill.e] 7.9 9.0 10.8 13.2 17.1 Difference costs [bill.e]11 4.6 5.1 5.6 9.8 12.8
considered within the decision making process in the electricity sector. The main uncertainties and some of their characteristics are described in the following.