English translation from Die Zeit online
6th October, 2015
The End of the Big Four's Energy Monopoly
A commission of experts has proclaimed the end of the energy monopoly: the market is no longer dominated by RWE & co. But there is still cause for concern about the future of the energy market.
Only four years ago, the German energy market was still widely regarded as an evil empire: a few energy giants divided up the kilowatt hours among themselves, allegedly going so far as to fix electricity prices, and suppressing all healthy competition. As recently as September, 2011, the independent "monopoly commission," a panel of experts convened by the federal government, complained that the level of competition in the energy market "continues to be unsatisfactory." According to the commission's calculations, E.on, RWE, Vattenfall and EnBW alone controlled around 80% of electricity generation capacity in Germany. The German energy sector was clearly a powerful oligarchy. But now the picture has radically changed. The monopoly commission has issued a new special report on the German energy market -- and their findings are reassuring. The companies formerly known as the 'big four' are still responsible for 62% of conventional electricity generation, but they "currently no longer control the market." A variety of indices suggest that their market power is either "unproblematic" or "unremarkable."
A mere 62 per cent share of the market
The judgement pronounced by the competition watchdogs, under the aegis of Bonn-based commercial lawyer Daniel Zimmer, effectively marks the end of an era for the German energy giants. "Over the past few years, we have achieved enormous progress in terms of level of competition," stated a spokesperson for the Federal Association for the Energy and Water Industries (Bundesverband der Energie- und Wasserwirtschaft or BDEW, for short), confirming the findings of the Bonn economists. The BDEW representative described the German energy market as characterised by its "striking number of players." "An average network distribution area will have 80 electricity suppliers and between 30 and 50 gas suppliers, all wooing customers."
The nominal market share percentages still sound impressive: according to the monopoly commission, RWE still retains 21% of the market, closely followed by E.on with 15% and Vattenfall with 13%.
But these percentages only refer to conventional energy production – which has become increasingly unimportant in the wake of the energy revolution. At a time when almost all conventional power plants are in the red, and an ever increasing number of plants are being phased out, the 'big four''s total market share of 62% is no longer very significant.
The eco lobby finds a new bogeyman
The 'big four''s loss of influence is already being reflected in the rhetoric of the green energy lobbyists. In the past, they had only to mention the supposedly sinister 'interests of the energy concerns' in order to arouse green sympathies in mainstream society, sympathies which they could then exploit for their own purposes.
But now that those evil giants have almost become objects of pity, thanks to their dwarfish share prices, the eco lobby has had to produce a new bogeyman. Lately, the "energy companies" are no longer being held up as bogeymen, in order to legitimise and justify ecological demands. The "coal lobby" has become the new scapegoat.
However, this semantic modification or verbal weapons upgrade also implies a new, broader definition of the field of battle. In the eyes of the environmental groups, employees and trades unions are directly implicated in the coal industry, together with politicians at both state and district level.
Commission pronounces climate reserve pointless
But, despite the demise of the energy oligarchy, there is cause for concern about the situation in the German electricity market. For example, the monopoly commission was extremely critical of the German economics ministry's plans to restructure the German electricity market. The proposal to create a capacity reserve, in order to guarantee supply, is associated with "significant threats to efficiency," the commission argued. The reserve would have to meet "strict requirements," be restricted in size and should only be implemented as a temporary measure. In September, the economics ministry, headed by Sigmar Gabriel (SDP), published a draft bill on the future of the electricity market. The bill envisages a "capacity and climate reserve." On the one hand, power plants are to be maintained and activated, independently of the reserve energy sources, whenever the electricity supply is insufficient to meet existing demand.
At the same time, several brown coal power plants are to be kept on standby. After four years, they will be completely decommissioned in the interests of meeting the national climate protection targets. This will "substantially reduce" carbon dioxide emissions in the German electricity sector, according to the proposal.
However, the monopoly commission regards the ecologically and politically motivated use of brown coal for the reserve as problematic. They argue that it would lead to high costs and would have "no effect" on total carbon dioxide emissions, which have already been stipulated by the European emissions trade.
Criticism of the latest demands for green energy
In addition, the commission took a critical view of the proposals to respond to the demands of those calling for more renewable energy. In the future, no more mandatory “feed-in reimbursements” should be paid out for the production of solar or wind power.
Instead, investors in green power plants should, in future, have to tender bids for public funding. This would make the system fundamentally more “competitive,” in the commission’s opinion.
The commission rejected the idea of dividing the bidding into categories, by energy source and, in the case of wind power, by whether the plants were water or land-based, as the ministry suggested. The commission argued that a “technologically neutral” bidding system would allow for “competition between different sources of power.” This would render the generation of electricity from renewable sources more efficient and could therefore prevent “further price rises for the consumer.”
Source text is from Die Zeit online, 6th October, 2015: http://www.welt.de/wirtschaft/energie/article147303124/Das-Ende-des-Energie-Monopols-der-grossen-Vier.html