An electricity market for the energy transition

National power generation

According to the ​List of Power Plants maintained by the Bundesnetzagentur (Federal Network Agency), as of 21 November 2024, generation facilities with a total net nominal capacity of 254.8 gigawatts (GW) are active on the electricity market. Of this net capacity, approximately 178.1 GW comes from renewable energy sources, including around 90.3 GW from solar power and about 70.8 GW from wind energy (both onshore and offshore). The total installed capacity of photovoltaic and wind power systems combined amounts to roughly 161 GW. The expansion of renewables continues to progress at a fast pace. In the first half of 2024 alone, around 9 GW of new renewable energy systems – primarily solar – was installed. Onshore wind energy in particular is seeing a significant increase in planning approvals: while 5.6 GW of capacity was approved by the end of June 2024, twice that amount of new approvals had already been registered by October 2024.

SMARD – electricity market data at a glance

SMARD, the electricity market platform, provides information on the electricity market in a form that is transparent, easy-to-understand and well-structured.

The website ​www.SMARD.de presents key electricity market data for Germany and specific statistics for Europe almost in real time. Users can access and combine data on generation, consumption, wholesale prices, imports and exports, as well as balancing energy, across various time periods, with the data presented in a user-friendly format. Experts also benefit from extensive analytical tools, enabling users to track developments in the electricity market and the stay u-to-date on how the energy transition is progressing at any time. Important note: SMARD only reflects a part of the electricity system – namely, the volumes of electricity fed into the public grid. Self-supply installations, such as those used in industry or to supply buildings, are not included. As a result, a key portion of total generation capacity is not captured.

Because of its central geographical location within Europe, Germany is an important player on the European electricity market and a hub for Europe-wide power flows. Physical electricity exchange takes place with eleven neighbouring countries – Denmark, the Netherlands, Belgium, Luxembourg, France, Switzerland, Austria, the Czech Republic, Poland, and (via submarine cable) Sweden and Norway.

The main drivers of import and export flows are wholesale prices in the respective bidding zones, which often follow national borders. These prices are influenced by local electricity demand, the level of renewable energy generation, and the fuel and costs of carbon certificates for fossil-fuelled power plants. According to preliminary figures, Germany imported around 24.4 TWh more electricity from abroad in 2024 than it exported to its neighbours. This is the equivalent of around 4.7 % of Germany’s gross electricity consumption. For comparison: according to data from the Working Group on Energy Balances (AG Energiebilanzen, 2023), Germany imports 100 % of the hard coal it uses. Import shares for oil (98 %) and natural gas (95 %) are similarly high. It is to expected that, as Germany advances the electrification of other sectors (sector coupling), electricity imports will increase. At the same time, imports of other energy carriers such as coal, gas, and oil are declining.

The electricity mix is changing

According to preliminary figures, around 497 billion kilowatt hours (kWh) of electricity was generated in Germany in 2024. While the share of renewable energy is steadily rising, the share of lignite and hard coal in Germany's energy mix for its electricity supply is declining.

Discrepancies in the totals due to rounding.

1) Run-of-river and storage water including natural inflow from pumped storage (PS) systems
2) Divided into regular and non-regular portion (50%:50%)
3) From 2003, all information on electricity generation from renewable energy according to data and calculations from the Working Group on Renewable Energy Statistics (AGEE-Stat).
4) Conversion output of electricity according to the Energy Balance for Germany, corresponds to gross electricity generation if PS systems are categorised as power plants, as is currently the case in the Energy Balance for Germany.
5) Previously used as a reference value for calculating the share of renewable energy, contains double counting because both pumped power generation and the storage balance/consumption are also included in this value.

Source: Working Group on Energy Balances

To reach these goals, renewable energy must continue to be rapidly expanded and integrated into the electricity supply system so it can replace fossil fuels. In the future, the electricity sector will also need to play a key role in decarbonising buildings, industry and transport – for example, through electric mobility and heat pumps for heating buildings. As electrification in the transport and heating sectors increases, electricity demand is expected to rise significantly – from around 525 TWh in 2023 to up to 750 TWh by 2030. The target of greenhouse gas neutrality by 2045 has been enshrined in the Energy Industry Act. Grid development planning is to be guided by the vision of a achieving a climate-neutral electricity grid.

In order to discuss how the electricity market can be further developed, the Federal Ministry for Economic Affairs and Energy has set up a dialogue forum called the Climate Neutral Electricity System Platform (PKNS). This platform brings together policymakers, academics, businesses, and civil society to discuss how the electricity system can not only be technically transformed to achieve climate neutrality, but also underpinned by the right regulatory framework and structures to ensure a reliable and cost-efficient supply. The working groups have focused on four key areas: future investment frameworks for renewable energy, investment frameworks for controllable capacities, flexibility, and local signals. The platform’s findings to date have been published in two reports.

Building on these discussions, the Federal Ministry for Economic Affairs and Climate Action (BMWK) presented its report Electricity Market Design of the Future in summer 2024. This report further refines and specifies the policy options across the four key areas and lays the groundwork for future political decisions. It was subject to a broad public consultation, and the results were presented at a PKNS plenary session, with a summary report published in November 2024. Based on the report, consultation outcomes, and ongoing discussions with stakeholders, the BMWK will continue to advance and define the individual measures, preparing them for political implementation.

The energy transition can only succeed if it is pursued as a collective European effort and complies with EU law. Germany is at the heart of a highly interconnected European electricity system, governed by uniform internal market rules. This integration enhances our energy security.

We are in permanent dialogue with the European Commission, EU Member States, and neighbouring countries about the future of the electricity market, as we are convinced that the energy transition can only be achieved efficiently within the framework of the internal market. This cooperation allows us, for example, to connect hydropower in Scandinavia and the Alpine regions with wind and solar power in Germany.

The core energy market data register – enhancing transparency in the energy sector

A core energy market data register was set up to improve the data situation and transparency in the energy sector. The register – which can be used by everyone – covers all generation installations – new and existing ones, installations to generate electricity from renewable and conventional energy – as well as certain consumption facilities and the facility operators. It facilitates the monitoring and expansion of existing plants. In addition, it helps to cut red rape by replacing or simplifying reporting requirements and by allowing other authorities to use core data.

The legal basis is the Core Energy Market Data Register Ordinance (PDF, 132 KB, in German), which entered into force on 1 July 2017. The Bundesnetzagentur has been operating the register as an online database as of 31 January 2019. Further information can be found here from the ​Bundesnetzagentur. Comments on the draft ordinance can be found here (in German).

However, the grid is not always capable of transporting the electricity that has been sold to the consumer. In this case, the grid operators usually use redispatch to ensure that, on the one hand, the grid remains secure, and on the other, that the consumer receives the electricity.

Redispatch as an interface between the market and the grid

If it is not possible to transport all the volumes of electricity via the grid, the transmission system operators undertake redispatch measures. That means that, at certain points in the grid (“ahead of the bottleneck”), they instruct generating installations to reduce (“curtail”) the amount of electricity they feed into the grid. This reduces the amount of electricity flowing through particularly congested powerlines so that the grid remains stable. In order to offset this, the transmission system operators instruct other generating installations (“behind the bottleneck”) to increase their output.

In case the redispatch capacity available from market power plants is insufficient, the reserve power plants designated specifically for this purpose (grid reserve) are deployed to resolve bottlenecks. Information on the dimensioning of the grid reserve requirements and the power plants included in the grid reserve can be found on the the ​information pages of the Bundesnetzagentur. In addition, particularly flexible power plants, known as special grid resources, are available to ensure grid security in the event of unexpected power grid blackouts.

Redispatch thus forms the interface between trade in electricity on the electricity market and the infrastructure of the electricity grid via which the transactions are physically carried out.

You can find updated information on redispatch coverage and costs at smard.de.

The Federal Ministry for Economic Affairs and Energy, the Bundesnetzagentur and the sector are continuously working to further develop the organisation of redispatch.

The System Average Interruption Duration Index (SAIDI) is used as a yardstick to measure the reliability of the electricity supply for end users. This index shows the average interruption duration caused by the grid for each final consumer during a given year. In Germany, this unavailability data, which is collected by the Bundesnetzagentur, has been indicating a clear downward trend since 2006. This shows that the electricity supply is not being affected by even a large share of renewable energy. In 2023, the average time for which a household or business in Germany had to go without power was just 12.8 minutes on average, which is a very good result compared to other countries.

Ongoing monitoring of security of supply on the electricity market

The Bundesnetzagentur continuously monitors the security of supply in Germany. The underlying scientific studies also cover situations with little feed-in from wind and solar installations as well as the phase-out of coal-fired electricity generation and nuclear power. The studies show that demand can be met on the electricity market in Germany in the period up to 2030 in all the scenarios which have been considered. Higher demand, including demand from electrically operated heat pumps and electromobility, has already been taken into account.

According to section 51 of the Energy Industry Act, the Bundesnetzagentur submits a monitoring report on the security of supply in the area of grid-based electricity supply every two years. The current report (here in German) is based on two sets of expertise: the first one was conducted by consentac, IER and FfE (expertise consentec et al., see annex), and an update was presented by r2b (expertise r2b, see annex).

The monitoring report uses the term “security of supply” to refer to the appropriate coverage of demand. This includes such aspects as electricity production, electricity transportation and the availability of primary energy carriers for electricity production. The Federal Government has submitted recommendations for action to the Bundestag based on the report by the Bundesnetzagentur. A list of these can be found here.

The report describes Germany’s present supply situation and its development, taking into account the circumstances affecting Germany on the national and international markets. The report does not study risks with unpredictable probability since the electricity market itself is not able to take precautions against such situations. Coverage of these risks is provided by the state’s crisis management system, which is available in addition to the electricity market in extreme situations. The current system therefore maintains a capacity reserve outside the electricity market. The capacity reserve is only used in exceptional events, if the power plants trading on the market are unable to provide sufficient amounts of electricity for example.

More information about the security of supply can be found here (in German).

Combined heat and power

CHP is a power plant technology that generates both electricity and heat, thus making more efficient use of the fuels it employs. The heat captured as part of the power generation process is used as thermal energy directly on-site or fed into heat networks. Increasingly widespread use of greenhouse gas-neutral generation technologies for electricity and heat have in turn increased pressure on CHP plants, which still largely use fossil fuels, to also switch to renewable fuel sources.

Since 2002, the Combined Heat and Power Act (CHP Act) has been the legal basis for funding CHP plants. The Act provides a framework for surcharge-financed funding of the highly efficient technology of combined heat and power generation. Pursuant to the CHP Act, the operators of funded combined heat and power installations are entitled to temporary payment of a supplement for each kilowatt-hour of CHP-based electricity they produce.

Amendment to the Act on Combined Heat and Power Generation (CHP Act)

The CHP Act has been amended several times to ensure that CHP continues to play a key role in the ongoing implementation of Germany’s energy transition.

The 2016 amendment to the CHP Act aimed to increase the amount of net generation of electricity from CHP installations and to boost investment in particularly efficient, flexible and low-carbon CHP installations.

The 2017 amendment to the CHP Act introduced more competition into the funding system. Since the end of 2017, the amount of funding disbursed for electricity from combined heat and power (CHP) plants with a capacity between 1 and 50 MW has been determined via auction. A separate auction is held for innovative CHP systems in order to provide funding for highly flexible, low-emission CHP plants that use heat from renewable sources in their operations. This new category of funding is intended to open up promising new prospects for combined heat and power and to provide incentives for necessary investment in flexible technologies. Learn more about this in our article on Combined Heat and Power

The amendments in 2020 and 2022 send much stronger signals for CHP flexibilisation and decarbonisation. For example, the amended coal replacement bonus strengthened incentives to replace coal-fired installations with gas-operated power plants. All new gas-fired CHP installations approved from July 2023 onwards are required to be hydrogen-ready. All new installations with a capacity of over 10 MW must prove that they can later be restructured to operate with 100% hydrogen with only moderate additional costs. This avoids the lock-in effect of purely fossil-based technologies and enables a gradual transition of controllable power plants towards climate-neutral fuels.

The most recently adopted amendment, which came into force on 1 April 2025, stipulates that funding is subject to an approval under the Federal Immission Control Act or the placing of an order for an installation or for construction work for a heat network, rather than the commencement of operations. Unavoidable waste heat can also be included as a source of heat for heat networks in the future. The Combined Heat and Power Act was further adapted to account for current European provisions.