Decarbonization requires a fundamental transformation of the electricity system in Germany. The phase-out of conventional, base-load capable generation (nuclear energy, coal power, and prospectively natural gas) and the sharp increase in variable generation from wind and solar power will inevitably make the system more unpredictable and decentralized. This requires a paradigm shift. Whereas in the past dispatchable generation followed consumption, in the future consumption will increasingly have to be at times when renewables are producing. In this respect, the system integration of renewable energy sources will become a central challenge.Firstly, the market design must change as it was initially designed for a market with easily dispatchable, centralized generation plants, driven by fuel and emission allowance prices. The energy-only market (EOM) was used to organize pricing according to marginal costs. However in a future system dominated almost exclusively by capital costs (grids and renewables have marginal costs of almost zero), marginal costs do not provide sufficient price signals for investments. This is because markets fulfill three essential tasks: firstly, the management of existing plants to achieve an economically optimum system (short-term allocation function), secondly, the creation of investment incentives for new capital equipment on both the generation and consumption side (long-term management function) and thirdly, the hedging of prices on the supply and demand sides (risk management function). A new market design must provide answers to all three.Secondly, the importance of demand-side flexibility for the new electricity system will increase, as flexible consumption and storage will have to contribute to the stability of the electricity system to a much greater extent than before. In the conventional electricity system, dispatchable power plants guaranteed short-term stability and natural gas storage ensured seasonal security of supply.Thirdly, the future electricity system will become much more complex due to the large number of players participating in generation and consumption. This will make the instantaneous and continuous control of all systems indispensable. The key to achieving this is digitalization.We view increasing digitalization as an indispensable prerequisite for the transformation of all areas of the energy industry. In the following, we therefore focus on foreseeable changes on the demand and supply sides and their future interaction.

The tension between investment incentives and competitive electricity prices

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发表日期：

2025年4月30日

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Sven Becker,
Lukas Heuck,
Hans-Wilhelm Schiffer,
Stefan Ulreich

摘要

Decarbonization requires a fundamental transformation of the electricity system in Germany. The phase-out of conventional, base-load capable generation (nuclear energy, coal power, and prospectively natural gas) and the sharp increase in variable generation from wind and solar power will inevitably make the system more unpredictable and decentralized. This requires a paradigm shift. Whereas in the past dispatchable generation followed consumption, in the future consumption will increasingly have to be at times when renewables are producing. In this respect, the system integration of renewable energy sources will become a central challenge.

Firstly, the market design must change as it was initially designed for a market with easily dispatchable, centralized generation plants, driven by fuel and emission allowance prices. The energy-only market (EOM) was used to organize pricing according to marginal costs. However in a future system dominated almost exclusively by capital costs (grids and renewables have marginal costs of almost zero), marginal costs do not provide sufficient price signals for investments.

This is because markets fulfill three essential tasks: firstly, the management of existing plants to achieve an economically optimum system (short-term allocation function), secondly, the creation of investment incentives for new capital equipment on both the generation and consumption side (long-term management function) and thirdly, the hedging of prices on the supply and demand sides (risk management function). A new market design must provide answers to all three.

Secondly, the importance of demand-side flexibility for the new electricity system will increase, as flexible consumption and storage will have to contribute to the stability of the electricity system to a much greater extent than before. In the conventional electricity system, dispatchable power plants guaranteed short-term stability and natural gas storage ensured seasonal security of supply.

Thirdly, the future electricity system will become much more complex due to the large number of players participating in generation and consumption. This will make the instantaneous and continuous control of all systems indispensable. The key to achieving this is digitalization.

We view increasing digitalization as an indispensable prerequisite for the transformation of all areas of the energy industry. In the following, we therefore focus on foreseeable changes on the demand and supply sides and their future interaction.