Bundeskartellamt’s 2020 market power report on the electricity generation sector

The Bundeskartellamt has today published its second market power report – report on the conditions of competition in the electricity generation sector in 2020. As in the previous year, the report focuses on analysing the market power situation in the generation and first-time sale of electricity.

Andreas Mundt, President of the Bundeskartellamt: “Although the demand for electricity has temporarily decreased due to the Covid-19 pandemic, the market conditions in the electricity generation sector have barely changed in 2020. RWE does currently not hold a dominant position, but the electricity producer is still very close to the threshold for dominance. The company was again found to be indispensable for meeting the electricity demand in a significant number of hours this year. The process of phasing out coal-fired electricity generation, which commenced in 2020, and the ongoing nuclear phase-out will result in a further reduction of power generation capacities in the near future. In the course and as a result of this tightening of the market, RWE could possibly cross the threshold for market dominance.”

The report analyses the market and competition conditions on the German-Luxembourg market for the first-time sale of electricity from 1 October 2019 up to and including 30 September 2020. The analyses are based on extensive data on the actual utilisation of all power plants in Germany. According to the results of the analyses, RWE is the only electricity producer that is comparatively close to the threshold for market dominance. The current market data also show a year-on-year increase in the use of net imports to meet the electricity demand in Germany.

The competition conditions regarding the provision of balancing energy, which is necessary to stabilise the grid by balancing out fluctuations in frequency, were changed fundamentally in the course of introducing the balancing energy market on 1 November 2020. Due to time constraints, it was not yet possible to analyse the market power situation in this sector in the present report in greater detail.

Andreas Mundt: “The first market data on the balancing energy market partly suggest a low level of liquidity and a potentially considerable scope for individual players to set prices. The authority will therefore keep a close eye on how the market power situation develops in this sector.”

The Bundeskartellamt has the statutory responsibility to publish a separate report on the competitive situation in the electricity generation sector at least once every two years. The reports are intended to provide greater legal certainty for market players with regard to their current market position. Due to the already
foreseeable developments particularly in the ongoing process of phasing out nuclear and coal power, the Bundeskartellamt is considering publishing also the upcoming market power report prior to the two-year period provided for by law.

The 2020 market power report is available in German here.