Volume 62, Issue 3

In the German federal elections on September 22, 2013, for the first time after 64 years, the Free Democratic Party (FDP) was not elected to the German federal parliament, the Bundestag, anymore. Less surprising than this fact is the malice of its political opponents with which this landslide defeat was accompanied. In this paper, it is argued that the hostility towards the Free Democrats originates from its turn to the Christian Democrats in 1982 with the so called Manifesto for the Market Economy written by Otto Graf Lambsdorff, then Federal Minister of the Economy. The Manifesto argued for a consolidation of public finance and tax reductions, for reforms in the labor market and the social security systems, and for a liberalization and privatization policy. While the Free Democrats did not achieve much of that agenda during the coalition with the Christian Democrats, it influenced the Agenda 2010 by Chancellor Schröder. The paper concludes with a proposal for a renewal of supply side policies in Germany and a renewal of the reform agenda.

The current political debate on the Energiewende in Germany is no longer focused on economic and ecological aspects. Instead, concerns regarding security of supply become more and more relevant. Though current risks for security of supply are mainly driven by the situation in transmission systems, policy debate is driven by the economic situation of plant operators and the provision of generation adequacy. On this background, many stakeholders claim the introduction of capacity mechanisms. The article shows that such decision should not be made in a purely national context, but requires strong European coordination. There is no clear evidence that the current energy-only market design will not deliver adequate investments in generation. However, a sustainable equilibrium requires stable and predictable boundary conditions for energy markets and a general acceptance of price peaks. A strategic reserve is proposed as an easy-to-implement, short-term and reversible means to guarantee security of supply while wellfounded political decisions on future market design can be taken.

This paper argues against the rapid implementation of capacity mechanisms in Germany. There is no systematic, non-temporary market failure in the German wholesale electricity market which could justify such a Government intervention. Neither the low elasticity of demand nor debatable public good characteristics nor the potentially missing acceptance of price spikes can support the idea of that the energy only market may fail to guarantee reliability of supply. In addition, there are currently no resilient signs of any shortage of supply. In contrast, the German wholesale electricity market is still characterized by over-capacities. The worldwide experience with capacity mechanisms also demonstrates most of all that no capacity market design is ever stable, but subject to change in often quite short intervals. Potential low-cost options to safeguard security of supply include a strategic reserve against generation failures. In addition, the Federal Cartel Office should correct its position that dominant firms must not offer electricity at a price above the short-run marginal cost. Such a prescription forecloses the market and chokes off investment and would in most other cases be regarded as an anticompetitive foreclosure strategy of a dominant firm. Zusammenfassung Dieser Beitrag spricht sich gegen eine hastige Einführung von Kapazitätsmechanismen in Deutschland aus. Ein systematisches dauerhaftes Marktversagen auf dem Großhandelsmarkt für Strom, das eine solche Maßnahme rechtfertigen könnte, ist aktuell nicht zu erkennen. Weder die geringe Nachfrageelastizität, vorgebliche Eigenschaften öffentlicher Güter oder die ggf. mangelnde politische Akzeptanz von Preisspitzen belegen bei näherer Analyse ein Marktversagen des Energy-Only Marktes. Belastbare Anzeichen für einen systemweiten Versorgungsengpass in den nächsten Jahren sind ebenfalls nicht ersichtlich. Vielmehr ist der deutsche Markt für Stromerzeugung nach wie vor durch deutliche Überkapazitäten gekennzeichnet. Die Erfahrung absolut aller Kapazitätsmechanismen auf der gesamten Welt lehrt zudem vor allem eines: Das Marktdesign ist nicht stabil, sondern wird in unterschiedlich kurzen Intervallen immer wieder verändert und angepasst. Die Vorstellung, heute ein langfristig stabiles Marktdesign zu entwerfen und zu implementieren, erscheint vor dem Hintergrund internationaler Erfahrungen doch etwas optimistisch. Möglich sind jedoch einige leicht zu implementierende Maßnahmen, um sich gegen erzeugungsseitig bedingte Stromausfälle abzusichern. So könnten begrenzte strategische Kaltreserven gehalten werden. Zudem sollte sich das Bundeskartellamt schnell von seiner Interpretation lösen, dass marktbeherrschende Unternehmen stets zu kurzfristigen Grenzkostenpreisen in den Markt bieten müssen. Diese Vorgabe wirkt marktverschließend und somit investitionshemmend und würde in anderen Fällen als wettbewerbswidrige Strategie ausgelegt werden.

Due to the specifics of the product electricity and electricity markets, there are considerable doubts whether „energy-only-electricity-markets“ can guarantee a desired level of security of energy supply. If in peak load periods, the price inelastic demand exceeds the supply, there will be blackouts, in which the price mechanism fails in the short term. Underinvestment in generation capacity is the result. Politico-economic problems, like politically set price limits and high security standards as well as time inconsistency problems of government actions increase this problem substantially. With the „Versorgungssicherheitsverträgen“ the authors suggest a capacity mechanism, which solves the problems at hand without affecting the efficient power plant use on the spot market.

This paper quantifies the effects of increased employment of elderly persons on the growth potential of the German economy until 2030. Starting from an analysis of the labour market situation of elderly persons today, we construct nine scenarios for the future development of the employment level of the elderly. These scenarios differ in participation rates, unemployment rates, and hours worked of the elderly. For each scenario, we then calculate the corresponding production potential of the German economy and percapita income levels. The difference in per-capita income in 2030 between the scenarios with the highest and lowest employment level is 10 %.

We discuss competition policy issues of vertical integration in internetbased two-sided markets against the background of the Google antitrust allegations. Network effects and economics of scale often lead to dominating companies, which are integrated over several markets. This implies efficiency gains but creates barriers to entry. Where entrants can appropriate dynamic effects accumulated by incumbents, barriers to entry are lowered but this reduces incumbents’ incentives to invest. Reducing multi homing and increasing switching costs is anti-competitive behaviour. Manipulating search results may leverage market power, but there is no theory on the ‚information power‘ of search engines. The concept of ‚search neutrality‘ is not convincing.