The European Commission’s decision to approve an agreement between Germany’s big power firms risks distorting energy market competition, according to the head of another company, who explained to EURACTIV Germany why he has started legal action.
Last week, green electricity producer Naturstrom AG and ten municipal and regional energy suppliers sued the European Commission before the European Union Court of Justice (ECJ). The reason: In 2019, the EU Commission approved the deal between the large German energy companies E.ON and RWE, which would reorganise the German energy sector. Under the deal, E.ON will take over all supply contracts, networks and metering points from RWE and its subsidiary Innogy. In return, RWE will receive all conventional and renewable power plants as well as the wholesale business of E.ON.
The Commission did not identify any risks for restricting competition in the German market. Thomas Banning, CEO of Naturstrom AG, sees things differently.
The “big four” of the German energy suppliers only have a manageable share of the renewable energy market in their hands. The majority is still determined by citizen projects or small suppliers. The Commission does not see any market distortion either. What are you worried about then?
We would have to add the word “yet” to your sentence. We fear considerable changes in the coming years, especially through the deal. It’s not just about the renewable generation capacities, there are indeed still many market participants.
The combination of regenerative and conventional power plants is critical, in addition to RWE’s new power in the marketing of electricity. With its conventional power plants, the Group is active on the primary market and with its renewable plants in direct marketing on the spot market of the exchange.
In the latter case, RWE does this not only for its own plants but also as a trader for many medium-sized producers.
The problem is that a large player with access to both different trading routes and different generation facilities can shift capacity between different technologies and marketing forms and influence pricing, for example in day-ahead trading [a short-term form of auction on the power exchange where the purchase price of electricity is negotiated the day before delivery].
But then a large player has 12-36 hours to behave differently than it has announced. It can reduce certain capacities and increase others and sell its own electricity at a particularly high price or buy electricity produced by others at a particularly low price. And it’s not just a question of their own power plant capacities, but also the quantities that are marketed for third parties. This is particularly worthwhile if there is an over- or undersupply of electricity, as it is easy to optimise in your own interest.
No other supplier will be able to do this in the future as RWE can.
So you are suing against this influence on electricity prices?
We are challenging the fact that the Commission did not even examine this point in any detail. In so doing, it has, formally speaking, made a big mistake. When you then see that it took a year to produce a justification, it becomes clear that a conscious approach is obviously being taken and that it is taking into account the fact that it is taking the wind out of the sails of small and medium-sized enterprises such as ours in a competitive environment.
Are you in principle against such big players in the market for renewable energies?
No, they too have their legitimacy. The question is in what way they participate in the market. After all, green electricity and the energy turnaround were not driven by the big players, but by many committed citizens and small and medium-sized enterprises.
However, as the old business models are yielding less and less profit, the corporations have discovered these issues for themselves and want to take central control of the market.
We, on the other hand, advocate a decentralised power supply. Regional electricity generation is a fundamental political issue: If I want to cultivate my own vegetable patch at home and feed myself from it and also invite neighbours to eat with me, then that should be and remain my right. That’s exactly what we want with electricity.
But the rules of the game, which were once created to make such developments possible, have been consistently dismantled in recent years. Instead, the aim is obviously to ensure the survival of the corporations.
Of course there are also areas in which large players are needed, offshore wind farms for example. But it’s not right that large companies with a lot of money from their former fossil fuel businesses can now simply buy up their shares in the renewable energy market and squeeze smaller market players out of business.
The idea of regional, decentralised energy production is a nice one, but it faces many challenges. Missing storage facilities, sector coupling, digitalised networks, to name but a few. Is such a model even realistic?
Of course, we’re already in the middle of the transition! Unhindered, we could, in a few years’ time, switch completely to a decentralised system of renewable energy sources, in which a few remaining large power stations would have to be integrated.
The approaches to this decentralisation are all there. Although the EU started the liberalisation of the electricity markets in the 1990s, it obviously no longer wants to see fair competition.
Could you give an example?
I can give you hundreds. In 2007, we took the first wind turbine from promotion under the German Renewable Energy Sources Act (EEG) and delivered the electricity directly to customers. But the EEG amendment of 2014 made this virtually impossible for us. At that time, it was decided that the marketing of green electricity should take place via the spot market of the stock exchange – but you can’t realize the value of green electricity there, it’s like selling paintings by well-known artists at rock-bottom prices.
Or take tenant electricity – designed so diagonally that it is hardly ever used. Storage facilities that do not pay off, because you have to pay an EEG levy to store it. New wind and solar parks require increasingly complex and lengthy approval procedures and awards in tenders. Citizen energy companies no longer have any chance at all in this game.
[Edited by Sam Morgan]