Report Monitoring report 2019 BUNDESNETZAGENTUR | BUNDESKARTELLAMT | 1 Monitoring report 2019 in accordance with section 63(3) in conjunction with section 35 of the Energy Industry Act (EnWG) and section 48(3) in conjunction with section 53(3) of the Competition Act (GWB) Editorial deadline: 27 November 2019 2 | BUNDESNETZAGENTUR | BUNDESKARTELLAMT Bundesnetzagentur für Elektrizität, Gas, Bundeskartellamt Telekommunikation, Post und Eisenbahnen Referat 603 Arbeitsgruppe Energie-Monitoring Tulpenfeld 4 Kaiser-Friedrich-Straße 16 53113 Bonn 53113 Bonn [email protected] [email protected] BUNDESNETZAGENTUR | BUNDESKARTELLAMT | 3 German Energy Industry Act section 63(3) Reporting (3) Once a year, the Bundesnetzagentur shall publish a report on its activities and in agreement with the Bundeskartellamt, to the extent that aspects of competition are concerned, on the results of its monitoring activities, and shall submit the report to the European Commission and the Agency for the Cooperation of Energy Regulators (ACER). The report shall include the report by the Bundeskartellamt on the results of its monitoring activities under section 48(3) in conjunction with section 53(3) of the Competition Act as prepared in agreement with the Bundesnetzagentur to the extent that aspects of regulation of the distribution networks are concerned. The report shall include general instructions issued by the Federal Ministry of Economic Affairs and Energy in accordance with section 61. German Competition Act section 53(3) Activity report and monitoring reports (3) At least every two years, as part of its monitoring activities pursuant to section 48(3) sentence 1, the Bundeskartellamt shall prepare a report on the competitive conditions in the electricity generation market. Monitoring Report data origin Unless otherwise indicated, the figures in this report have been taken from the data collected during the monitoring survey carried out annually by the Bundesnetzagentur and the Bundeskartellamt. Undertakings that are active on the electricity or gas market in Germany provide data for the survey on all aspects of the value added chain (generation, network operation, metering operations, trade, marketing etc). Further data on trade is supplied by the electricity and gas stock exchanges, and by energy brokers. All the data is checked for plausibility and validated by the Bundesnetzagentur and the Bundeskartellamt. In 2019, some 6,500 undertakings overall supplied data to the two authorities. Thus the degree of coverage in each market segment, as reflected by the level of response, was well over 95% and in many areas it reached 100%. Any discrepancies between this and other data are the result of different data sources, definitions and survey periods. BUNDESNETZAGENTUR | BUNDESKARTELLAMT | 5 Foreword The energy transition and climate targets continue to shape developments in the electricity and gas markets in Germany. These developments are documented and analysed in this Monitoring Report. Consumers remain in the spotlight this year. The monitoring carried out by the Bundesnetzagentur and the Bundeskartellamt aims to inform consumers, create transparency in the market and provide an analysis of developments in competition. The market share of the five biggest electricity producers – and thus the concentration on the conventional electricity generation market – continued to decline overall. However, power within the group has shifted in recent years, particularly due to Vattenfall's sale of its lignite activities to LEAG and the takeover of E.ON subsidiary Uniper by Finnish company Fortum. While RWE is the market leader by some distance, its share does not suggest that it has a dominant position. As part of its examination of the plans to merge RWE and E.ON, the Bundeskartellamt carried out a pivotal analysis, which revealed that RWE was indeed pivotal – that is to say, indispensable – for meeting electricity demand for a fairly significant number of hours over the year, but not to an extent that would lead to a presumption of market dominance. The Bundeskartellamt will further pursue its analysis in its forthcoming report on the competitive conditions in the field of electricity generation (market power report). The energy transition continues to make progress. As in previous years, conventionally generated electricity is losing ground to electricity from renewable sources. The increase in electricity from renewables was smaller in 2018, particularly because of the decline in new build projects, but even so, 37% of domestic gross electricity consumption was generated from renewable energy – a record high. New solar photovoltaic installations helped achieve this level, while fewer new wind turbines were added both onshore and offshore. Despite the increase in electricity generated by installations receiving payments under the Renewable Energy Sources Act (EEG), the total amount of EEG payments fell for the first time in 2018 compared to previous years. The decrease was due in particular to the comparatively high electricity prices. These affect the level of the statutory payments for installations marketed directly by the producers, which make up the overwhelming majority of this generation. The far-reaching changes in electricity generation have a direct impact on the grid and require significant adjustments to it. The expansion of the grid continues to lag behind where it needs to be. Apart from the rollout of new infrastructure, the implementation of specific measures to optimise and increase the utilisation of the existing electricity networks is becoming more and more important. These measures are already taken into account when sizing long-term grid expansion plans. The reorganisation of electricity production, coupled with the delays in the rollout of grid infrastructure, is making it necessary for transmission system operators to intervene regularly in generation in order to maintain system security. The volume of these electricity-related and voltage-related redispatching measures, which are used to adjust electricity feed-in from conventional generating installations to relieve overloading of power lines, remained at a high level in 2018, although it was down on the previous year. The volume of renewable energy installations curtailed by feed-in management measures was almost unchanged in 6 | FOREWORD comparison to the previous year, with the proportion of electricity from renewables that was able to be transported remaining constant at 97%. Electricity network charges rose in 2019 despite some cost components being transferred to the offshore network surcharge. The increase was due to the rising costs for the electricity grid expansion at all levels and the high projected costs for system security measures. Average wholesale electricity prices were again considerably higher in 2018, this time by about 22%. By contrast, liquidity on the wholesale electricity trading markets developed in different directions, with day- ahead trading falling while intraday trading showed significant growth. The volume of futures trading registered growth too following the de facto split in the German-Austrian market area from 1 October 2018, which had a significant effect on the structure of the relevant trading products. There was also a clear increase in gas wholesale prices in 2018, while liquidity in wholesale gas trading declined overall. As in previous years, the combined market shares of the largest electricity and gas suppliers for standard load profile and interval-metered customers in the respective retail markets were clearly below the statutory thresholds for presuming market dominance. Nevertheless, the positive developments on the retail electricity and gas markets stalled in many areas. Supplier switching rates, for example, remained more or less unchanged in 2018. The number of providers available to consumers stabilised at its already high level. On the reference date of 1 April 2019, the average electricity price for household customers was over 30 ct/kWh for the first time. Gas prices for household customers, meanwhile, recorded a year-on-year increase after several years of decline. Electricity and gas prices for commercial and industrial customers rose as well, but rather less steeply. The price rises that occurred during the reporting year were primarily accounted for by the price components controlled by the supplier, as the higher prices that had already been seen on the wholesale markets in the previous year were passed on to end customers. There was good news regarding electricity and gas disconnections. The number of connections, which are carried out when customers do not pay their bills, dropped in both sectors in 2018. Germany's position as a natural gas transit country for Europe is strengthening, with a rise in natural gas imports and exports from the previous year. Germany remains dependent on natural gas imports owing to the continued decline in domestic production. The country's storage levels from existing gas storage facilities reached a new high at the beginning of the withdrawal period in early November 2019, giving a boost to supply security in the natural gas sector. The low average interruption duration per connected final consumer – less than a minute in the year – also indicates the high supply quality of the German gas network. The conversion of the German L-gas networks to H-gas supply, which is affecting a lot of private consumers in particular, is going ahead as