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Article - Electricity Market of the Future

The Climate-Neutral Electricity System Platform – in dialogue for a new market design


Scenarios of the IEA: The electricity system has to be largely climate neutral by around 2035 so that all remaining sectors can be climate neutral by 2045. This means that the electricity sector will completely switch over to renewable energy at an unprecedented speed and has to fundamentally change. For this transition to an energy supply that is completely renewable to be efficient, secure and swift, the electricity market design also requires further development. Within the Climate-Neutral Electricity System Platform, stakeholders from politics, science, business and civil society are coming together to develop options and concrete proposals.

Strommasten und Windrad stehen für Energieversorgungssicherheit.

© BMWK/Holger Vonderlind

In the coalition agreement of the governing parties, the Climate-Neutral Electricity System Platform (PKNS) was designed as a process that includes the broad involvement of stakeholders from politics, science, business and civil society in order to develop suggestions to the energy market design in a largely climate-neutral electricity system. Potential solutions will be identified as well as targeted and specific measures for its medium and long-term design will be sketched out in a joint process, evaluated according to developed criteria.

On the path to climate neutrality, the Federal Government has set itself the goal of reaching an 80% share of renewable energy in gross electricity consumption by 2030. A system that has been based on nuclear power plants and coal-fired power generation must completely switch over to renewable energy. Furthermore, electricity consumption will see massive rises as decarbonisation in other sectors follows via the increased use of green electricity, such as in heat pumps and electric cars. A completely new, flexible and interacting electricity system is necessary for this. Fundamental questions arise on the path to climate neutrality regarding the precise form the future electricity system will take and how a suitable energy market design should be developed:

  • How can the funding of renewables be safeguarded in the long term in order to achieve the expansion targets for renewables?
  • What role do flexibility options play in the future electricity system? How should the regulatory framework be designed so that they can be implemented in a way that is optimal for the system?
  • How can a sufficient deployment and operation of controllable capacity be ensured so that security of supply remains high at times when there is no wind or sun?
  • How can the investment and operational decisions of plants and consumers be incentivised through regional price signals in such a way that the tasks around the rapid expansion of renewables, the increase in electricity consumption and the limited grid capacity are well managed?

These questions are characterised by diverse interdependencies and affect all those involved in the electricity market, from the areas of investment, generation, trade, transport and distribution, right up to consumption. The platform is to hold open ended discussions on potential options for the electricity market design in a participatory process by using and incorporating different stakeholder perspectives.

What is the PKNS?

The Climate-Neutral Electricity System Platform

How will the proposals of the Climate-Neutral Electricity System Platform be drawn up?

The Climate-Neutral Electricity System Platform brings business, politics, civil society and science together to find solutions for the electricity market design of the future.

The composition of the platform:

The Climate-neutral electricity system is a broad-based platform in which various interest groups from the areas of the energy business, consumption, industry and civil society participate. Policymakers are represented by participants from coalition parties and the Länder. The relevant ministries of the Federal Government and federal authorities are also involved. The platform is supplemented and supported by members of scientific institutions.

The structure of the platform:

The plenary in which all stakeholders are represented forms the heart of the platform. A thematic working group (WG) is to be formed for the discussion of each one of the Climate-Neutral Electricity System Platform’s four forward-looking questions and these will be made up of the platform’s participants. A steering group composed of representatives from the coalition parties will support and direct the process at political level. The Climate-Neutral Electricity System Platform will be organised by an office of the Federal Ministry for Economic Affairs and Climate Action. The German Energy Agency (dena) will support the Federal Ministry for Economic Affairs and Climate Action in the organisational aspects of the platform. In addition, specialist scientific support will be provided by a broadly positioned consortium comprised of Guidehouse, Consentec, Fraunhofer ISI, Neon, Öko-Institut (Institute for Applied Ecology) and r2b energy consulting.

PKNS Governance Enlarge


The functioning of the platform:

The Climate-Neutral Electricity System Platform is a forum for continuous and results-oriented discussion on the future electricity market design. Within an open process, debate will be thematically focussed and led in a task-oriented manner. The process will be flexibly structured so that the latest developments can be taken into account. The Climate-Neutral Electricity System Platform depends on the interactions between the various stakeholders and the exchanging of different perspectives. The support of scientists and experts will bolster the high level of specialised discussion.

In addition to the plenary meetings on overarching questions, the WGs will convene to discuss their respective thematic areas and where necessary, also hold cross-WG meetings. Interaction between the topic clusters is inherent and will be taken into account in the process.

The content and findings of the discussions will be published by the Federal Ministry for Economic Affairs and Climate Action on this website. Additionally, according to current plans, a first report on the status of discussions and results already obtained is to be presented in the summer of 2023. A further report will follow in the winter of 2023/24.

What topics does the Climate-Neutral Electricity System Platform address?

The Climate-Neutral Electricity System Platform focuses on four fields of action: renewable energy, flexibility, secured capacity and locational signals.

The Climate-Neutral Electricity System Platform picks up on the most important questions surrounding the design of the future, largely climate-neutral electricity system and its market design.

WG 1: Ensuring the Funding of Renewable Energy

The Funding Renewables WG deals with the question of how incentives for renewable energy installations in a climate-neutral electricity system can be secured, i.e. for sufficient deployment and operation that serves the system. The focus of the discussion here is on the period after the complete realisation of the phase-out of coal, during which the deployment of renewables is to be as market driven as possible. The key question will be the extent to which the energy-only market or a different market design can set the necessary incentives to also invest in renewables in the future.

WG 2: Expansion and Integration of Flexibility Options

The Flexibility Options WG examines the question of how flexibility options might be used for system balancing and integrated into the electricity system, and the obstacles and barriers that have to be removed for this to happen. The focus here is on demand-side flexibility options including energy storage in the industry, commerce, trade and service sectors and in households.

WG 3: Funding of Controllable Capacities to Cover Residual Load

The Funding of Controllable Capacities WG is concerned with the question of how the needs-oriented supply for consumers can also be maintained in times of high residual load. This means ensuring security of supply in times when there is no wind or sun, and electricity generation from renewables is therefore insufficient to cover demand.

WG 4: Locational Signals

The Locational Signals WG deals with regional and local price signals. In the new electricity system, renewable energy needs to be transported across long distances and integrated into the transmission and distribution grid. Grid expansion is therefore the top priority. Nevertheless, discussions must be held on whether and how, in an electricity system that is based largely on renewable energy sources, there have to be locational price signals that support better regional load management and represent the grid better on the market. A complete expansion of the power grid that is free of congestion is not possible and would also not be efficient. That said, curtailments of renewable energy should be as infrequent as possible. Locational signals can be instrumentally depicted in diverse ways, for example, via the grid fee system, measures for the use of flexibility that serves the system, in national funding schemes, in redispatch or in the electricity market. This working group will address signals both at the level of the transmission system and the distribution grid, and discuss all options in an open-ended manner.

What happens with the findings of the Climate-Neutral Electricity System Platform?

The findings of the Climate-Neutral Electricity System Platform are an important basis for political decisions in Germany and Europe.

The developed proposals and options for the development of the electricity market design within the Climate-Neutral Electricity System Platform are an important basis for the drafting of specific adjustments to the regulatory framework for the electricity market.

Because of Germany’s geographic position and its size, it is important to bear in mind the consequences of potential adjustments to the European single market for electricity. Germany shares a bidding zone with Luxembourg. Therefore, Luxembourg is also invited as a participant to the platform.

In its discussions, the platform will appropriately include the latest European proposals for a short-term, targeted reform of the European internal electricity market. A potential and more fundamental reform, requires an in-depth analysis. The platform can play a significant role here.

Further Information

Regarding the current discussion on the electricity market design on European level, Germany has published a joint letter together with six other member states. You can find it here.