The Rise of Third Parties and the Fall of Incumbents Driven by Large-Scale Integration of Renewable Energies: The Case of Germany

The energy transition changes the electricity supply industry in Germany dramatically. Large-scale integration of RES triggers significant market entry of third parties, i.e. non-incumbent private investors. Empirical evidence confirms the growing amount of intra-sector trade, while electricity supply is getting decentralized. Together with non-electric third parties (e.g. ICT) the system starts to become fragmented. The electricity supply industry changes quickly from a top-down, single-firm game, into a decentralized multiple-player system. Moreover, the incumbent conventional market parties are facing “disruptive challenges”: unless they adjust their business strategy quickly, they are unlikely to survive. We briefly introduce how the incumbents are radically adopting new strategies in an attempt to internalize the energy transition and the rise of third parties.