The German Energy Market
The German energy market is one of the largest in Europe. The domestic power market consumed 142 TWh of energy in 2006, while gas consumption stood at 283 TWh.
The German power market is dominated by four vertically integrated companies: E.ON, RWE, Vattenfall and EnBW, who supply approximately 50% of the market. In addition to this, there are approximately 60 regional suppliers and 725 municipal suppliers, who have both distribution and retail assets. There are also around 150 pure retail companies.
The gas supply market is dominated by E.ON Ruhrgas which sells around 50% of Germany’s gas by volume and holds shares in 30% of the regional distribution companies. There are 730 vertically integrated DSO/supplier businesses, which supply a large fraction of end customers.
Liberalisation
The German gas and power markets were nominally fully liberalised in 1998. Change was initially slow, due in part to the industry being allowed to self-regulate. However, the market is now considered to be on the verge of maturity, following the creation of an industry regulator, the Bundesnetzagentur (BNA), which set about introducing measures to promote competition. One of these was to enforce the legal unbundling for suppliers with more than 100 000 customers.
Another important step for market liberalisation was the introduction of a unified switching process for all market participants. This included standard processing steps and data specifications. For the German gas market, where the liberalisation process has been somewhat slower, these industry standards will be mandatory from August 2008 onwards.
Customer Switching
The German domestic switching market may be finally approaching maturity ten years after market opening.
Initially, switching levels for power were quite low; however, the years 2006 and especially 2007 bucked the trend with 690 000 and 1 300 000 households respectively switching supplier. As prices continue to increase, expectations are that the switching market will double again in size in 2008. There is a strong niche market for renewable suppliers – these account for 1% of the total market share, and 10% of the switching market.
Although there are fewer alternative suppliers in the gas market compared to the power market, increasing numbers of suppliers offer gas and sometimes dual fuel, and competition is on the increase. In 2005 a mere 302 customers* switched supplier. In 2006, 5688 domestic customers had switched supplier, by 2007 the overall number had climbed to 175 000.
Currently, around 10% of the total domestic market (4 million customers) have switched provider.
Download: A full history of the German energy market (PDF)
*figure includes domestic, industrial and commercial customers.
