The Monopoly Commission, an independent advisory body to the German government, has today published a report on the current level of competition in energy wholesale markets in Germany, particularly in the power sector. The Commission finds that the current concentration in German energy markets is not consistent with competition concerns.

The market share of the largest four power generators has fallen from 62% in 2014 to 54% in 2016. Other metrics which the Commission uses to assess the level of competition, such as the residual supply index (RSI), are also not consistent with any competitive concern for the wholesale power market.

The Commission has also commented on competitive price formation mechanisms in the wholesale power market. In the absence of a capacity market, investments in new generation assets require price mark-ups for energy sold on top of the short-term marginal costs of power generation. Such mark-ups can also be interpreted as evidence of market power. The Monopoly Commission therefore emphasised the importance of guidelines to distinguish admissible from abusive price peaks. The Federal Cartel Office in Germany conducted a public consultation on price formation guidelines in 2016.

Frontier has comprehensive experience in supporting clients on market structure and price formation in wholesale power markets in Germany:

• We conducted a study (in German) for the German Ministry of Economics and Energy (together with Formaet Services) on the functionality and sustainability of the wholesale power market in 2015
• We have supported energy companies during an inquiry into wholesale power markets in 2010
• We advised the Germany Federal Cartel Office in 2006 on price formation issues after the introduction of the EU Emissions Trading Scheme

More broadly, Frontier regularly advises public and private clients on competition-related questions in the energy and other sectors.

For more information, please contact media@frontier-economics.com or call +44 (0) 20 7031 7000