The effect of German strategic reserves on the central European electricity market

The increase in intermittent electricity generation is increasing investment risk in the electricity market. A capacity mechanism can contribute to security of supply. Germany is considering an expansion of its small strategic reserve in the south. In this paper the effects of deploying a strategic reserve in the German market are modelled to analyse (1) the leakage of the effectiveness of a strategic reserves to neighbouring countries; and (2) the effect of a strategic reserve on investment behaviour. We conclude that in Germany, a strategic reserve can be an effective capacity mechanism.