In its 9th Sector Report on Energy, published today, the Monopolies Commission analyses the competitive situation in various sectors of the energy industry and recommends specific measures to the Federal Government aimed at improving the security and efficiency of energy supply.
On the one hand, the report focuses on various upstream and wholesale markets for electricity and gas. Particular emphasis is placed here on how security of supply can be guaranteed in the long term. To this end, the import structure in the gas market must be made more diversified and flexible. Furthermore, to enable the early identification of supply risks, a data-based supply risk index should be incorporated into the Federal Network Agency’s Gas Emergency Plan, so that potential risks to security of supply can be identified at an earlier stage. In the electricity sector, risks to security of supply stem in particular from the impending transformation of the energy system towards carbon-free, but often weather-dependent, forms of generation. To ensure security of supply during periods of low generation, the Federal Government should replace the existing system of strategic power station reserves with a competitively driven capacity market for guaranteed output. Unlike the strategic reserve, all flexible capacity procured in the capacity market is always available for use on the market. In the competition-driven capacity market, electricity suppliers and large customers procure their expected requirements for power station capacity in advance. The Federal Government can then specifically increase this capacity to avoid any remaining risks to security of supply.
The Monopolies Commission has also examined the retail energy markets. In particular, the gas shortage resulting from the war in Ukraine has led to uncertainty and price rises for households and industry. Competition between multiple suppliers and consumers’ willingness to switch are therefore all the more important for ensuring affordable prices in the long term. Willingness to switch could be increased, for example, through information campaigns. With regard to the regulations on basic and substitute supply, alternatives to the current system should be examined. Under the current system, the largest supplier automatically becomes the basic supplier and can thus maintain its market power. One alternative is a tendering model to determine the basic supplier. Should support be required following the planned expiry of the gas price cap in December 2023, direct transfer payments to households in need are more appropriate than interventions in price formation. Price interventions distort signals of scarcity and are also inaccurate from a distributional perspective, as high-income households also benefit from them.
Consumers also benefit from competition amongst charging infrastructure providers in the field of electric mobility. The Monopolies Commission notes that the degree of concentration amongst individual providers remains high, though it is declining. The largest providers still hold a high average market share across Germany of 49 per cent and 45 per cent for standard and fast-charging points respectively. As of today, the Monopolies Commission is launching a website where a wide range of regional data – including, for example, the relevant market share of the largest local provider – can be accessed in detail (link). The Monopolkommission recommends supporting local authorities in tendering processes for the competitive roll-out of charging points and making financial support conditional on certain requirements. Effective competition for motorway charging points requires access for several competitors to service areas. Finally, prices for ad hoc charging should be made transparent to charging customers.
