The Commission concluded that the measure improves the security of electricity supply whilst maintaining competition in the Single Market.
Under the measure (Verordnung zu abschaltbaren Lasten – "AbLaV") German network operators can enter into flexible, weekly contracts with customers for a total of 1500 megawatt (MW) of capacity. This allows the network operators to remotely and at short notice reduce the consumption of those customers in exchange for the payment of a fee. The measure will help the network operators to stabilise the electricity network by cutting demand when necessary.
In the present case, Germany has shown that its electricity system, with an increasing share of intermittent renewable energy in the energy mix, requires increasing flexibility in the electricity grid. The Commission found that AbLaV will improve the ability of network operators to react to short term volatility in the electricity network.
The Commission also found that the measure has the long-term benefit of creating a more responsive demand side. Operating a power grid reliably requires that electricity supply and demand are in balance at all times. AbLaV helps to maintain this balance and improve security of supply by managing demand rather than by adding or maintaining electricity generation capacity. As a result, the electricity system will be better equipped to absorb fluctuations in electricity generation, which improves the system's ability to integrate a growing share of variable renewable energy in the energy mix.
The cost effectiveness of the measure is ensured by weekly competitive auctions to determine the fee paid to customers. The auctions will be open to a wide variety of participants: all electricity customers consuming more than 10 MW, that is in general medium and large companies, can offer interruptible capacity to network operators. Smaller customers can also participate, if they bundle their offers to meet the threshold.
On this basis, the Commission concluded that AbLaV will improve the short-term reliability and long-term security of supply of the electricity network in Germany in line with EU state aid rules, in particular its 2014 Guidelines on State aid for environmental protection and energy.
Demand response schemes are a form of capacity mechanism if they are introduced by the State to ensure security of electricity supply. If they are implemented where they are not genuinely necessary, or if they are badly designed, capacity mechanisms can distort competition, hinder electricity flows across borders and lead to consumers overpaying for electricity. The Commission has an ongoing state aid sector inquiry into capacity mechanisms launched in April 2015. Its preliminary report highlighted that capacity mechanisms must address a genuine need and Member States need to adequately assess the best way to increase security of supply. It also stressed the importance of Member States considering demand side options, i.e. ways to improve security of supply by managing demand rather than by building or maintaining electricity generation capacity.