The Impact of Liberalisation on the Environmental Performance of the Electricity Sector in Germany

Aim: to Answer the Following Questions during this Presentation: How is the the German Electricity sector administered? Why did Germany Liberalise the electricity sector ? What options did Germany select within EU Directive? What were the results of Liberalisation?

German Electricity Sector Governance Ministry for Economics & Technology Ministry for Environment, Nature Conservation & Nuclear Safety Responsible for Energy Policy Responsible for Environmental/ Energy Policy Ministry for Education, Science, Research & technology Co-ordinates energy research and development Federal Cartel Office Controls Fair Competition & mergers Länder Governments Länder Ministries of Economics/Environment Implement law and grant licenses in their Länder Authorise single buyers, transit tariffs, supply tariffs Federal Level Länder Level

Key Environmental/Electricity Legislation 5 laws - restrict emissions 4 Key laws that subsidise renewable energy and combined heat and power. Tax on Electricity - Eco tax & Tax on Gas Subsidies for energy efficiency programs. Voluntary agreements - phase out nuclear & reduce GHG emissions

Liberalisation Objectives in Germany Political Objectives - to support EU unification and to promote diversification of energy supply Socio-economic Objectives - to reduce costs of electricity and improve efficiency in East. Environmental Objectives - to support the introduction of renewable energy and reduce GHG emissions.

Key milestones in German Liberalisation Process Federation Regulation on electricity Tariffs Energy law Amendment to the 1958 Act Against Restraints of Competition.

Extent Germany implemented EU Directive Directive RequirementHow Implemented in German -Third Party Access- Negotiated Third Party Access - Competition restrictions noted- Network access restrictions in E. - Regulator- Federal Cartel Office - Transmission System Operator - (TSO)8 transmission operators - Permitted Reason to deny Access- Lack of capacity & Reciprocity - Transmission charges- Point Tariff - Market Opening- Full market opening (1998) - Tender or Authorisation- Authorisation - Unbundling of TSO- Management is unbundled - Supply unbundling- Full unbundling Source: Adapted from Table by EuroElectric in article ‘Implementation of the Internal Electricity Market Directive

Results of German Electricity Sector liberalisation Access to the Grid Number of Players in the market Price of Electricity Finance and Risk Environmental Performance

No. of Players in the Market

No. of Players in the Market (cont)

The Price of Electricity

Finance and Risk Finance and Risk has: 1. made it less attractive to invest in coal, nuclear, hydro and 2. changed Behaviour of players in the market: Expansion within the usual segment of business Growth by investing in non-electric utilities International Expansion

Environmental Performance in the German Electricity Sector Reduced Emissions CO2 Reduced emission SO2 and Nox Increase No. of Renewable Energy Constant Energy Efficiency Reduced Costs to German Government

Emissions of CO 2 Ministry for Economy & Technology 2001

SO2 and Nox Emissions from the electricity Sector Ministry for Economy & Technology 2001

Environmental Performance in the German Electricity Sector Reduced Emissions CO2 Reduced emission SO2 and Nox Increase No. of Renewable Energy Constant Energy Efficiency Reduced Costs to German Government

1990 Damage Costs: NO X, SO 2, NMVOC,NH 3 [European Commission 1998].

Conclusions Environmental Performance Transparency Access to Grid Ownership Price of Electricity Finance and Risk

The key aspects of liberalisation, if any, that have affected the environmental impact of electricity systems? Due to Germany‘s strong environmental regulation, Liberalisation has had a limited impact on the environmental performance of the electricity sector.

What are environmental/energy/technological policies implemented to control environmental impact? Strong emission controls Support to E.Germany to improve technology Subsidies to support renewable energy, CHP, and energy efficiency. Taxes Voluntary Agreements with Business

Why are these Policies Successful? Effective enforcement Increasing environmental awareness leading to public support for strong governement actions Culture where high level of State/Gov. intervention is considered good.