Germany does not yet have a new coalition, but the debate about German energy policy reform is in full bloom. Today, Craig Morris talks about the changes that would affect energy corporations – and can’t help noticing the German penchant for market-based instruments and efforts to limit governmental intervention. Germany remains wedded to free markets despite the numerous obvious market failures in the energy sector. The solutions proposed will have to be market-based (however defined) if they are to be taken seriously. I see two major market failures that need to be addressed; the list is by no means exhaustive. Market failure #1: Idle backup capacity unprofitable. Ideally, if a gas turbine only runs for a couple of hundred hours a year rather than a couple of thousand, it should be able to simply charge more so that it remains profitable. In practice, the turbine operator does not know how many hours the plant will run for the rest of the year and simply has to take whatever price the market offers when the turbine … Continue reading Reforming the Renewable Energy Sources Act (EEG) – Market solutions for market failures