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

• 1989 - Federation Regulation on electricity Tariffs

• 1998 - Energy law

• 1999 - Amendment to the 1958 Act Against Restraints of Competition.

Extent Germany implemented EU Directive Directive Requirement How 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

Contribution to Total Electricity Generation (%)

10%

80%

10%

850 Municipal Utilities 6 Supra regional companies

80 Regional companies

No. of Players in the Market

No. of Players in the Market (cont)

6 Largest co. % of 80% of market

37%

34%

13%

9%4%3%

E.on (VIAG &VEBA)

REW AG (RWE &VEW)

EnBW/EdF

VEAG

HEW

BEWAG

The Price of Electricity

4

5

6

7

8

9

10

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

Year

€/10

0 kW

h D

F

UK

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 CO2

Reductions in CO2 Emissions from the German Electricity Sector

0

100

200

300

400

500

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

Years

Mt

of

Ca

rbo

n D

iox

ide

Ministry for Economy & Technology 2001

SO2 and Nox Emissions from the electricity Sector

Emissions of SO2 and NOx from the German Electricity Sector

0

500

1.000

1.500

2.000

2.500

3.000

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

Kilo

To

ns

SO2

Nox

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: NOX, SO2, NMVOC,NH3

0

2

4

6

8

10

12

14

Dam

ages

Co

sts

[bil

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1.1

Damages OutsideGermany

[European Commission 1998].

Conclusions

• Environmental Performance

• Transparency

• Access to Grid

• Ownership

• Price of Electricity

• Finance and Risk

.DOSE

IMPA

CT

Dose-

Response

Function

impact(e.g., cases of asthma due to ambient

concentration of particulates)

DOSE-RESPONSE FUNCTION(or exposure-response function)

cost(e.g., willingness-to-pay to avoid a

case of asthma)

ECONOMIC VALUATION

DISPERSION(e.g. atmospheric dispersion model)

emission(e.g., kg/yr of particulates)

increase in concentrationat receptor sites

(e.g., µg/m3 of particulatesin all affected regions)

SOURCE(specification of site and technology)

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 .