With the so-called “Easter package”, which was adopted in spring, the Federal Government is taking it seriously: 80% of electricity consumption in Germany is to be generated from renewable sources by 2030. The previous target of 65% by 2030 has thus been significantly increased. By way of comparison, the actual share of renewables was around 42% in 2021. At the same time, there is agreement that electricity consumption will rise significantly in the next few years — this is clearly reflected in trends in the mobility revolution, the heating revolution and the decarbonization of industry.
In sum, we are talking about having to more than double the share of renewables in Germany within the next seven and a half years (by 2030) in order to achieve these goals. And aren't we just painfully seeing how — reinforced by the lack of Russian gas supplies — the electricity market is already facing an ordeal? (see our article on current developments Large-scale battery storage as a key technology in the energy revolution, in which we highlight what to expect on the energy market in the next few years using Pentecost Monday, June 6, 2022 as an example)
Let us assume that in the next few years we will actually be able to defy tight supply chains, resolve the conflicts between the Wadden Sea and wind power, between solar energy harvesting and agriculture, and actually build the enormous amounts of renewables. Are we not then faced with the fundamental problem that the power grids are not even available to transport the excess electricity generated? After all, the costs of network and system security measures due to traffic jams on power lines were already an impressive 2.3 billion euros in 2021, and the trend is rising. Behind this figure are not only costs for Redispatch conventional generation plants, in particular to alleviate the bottleneck between northern and southern Germany. No, renewable energies were also forcibly switched off on a large scale in order to alleviate bottlenecks both on the electricity highways of the transmission grid and on the electricity “federal roads” of the distribution grid.
In this way, almost 6 TWh of renewable electricity production were limited in 2021, which corresponds to almost 3% of total electricity generation from renewables.
With the ambitious expansion goals for 2030, increasing electricity consumption and the bottlenecks that are already occurring today, the power grid of the future is faced with the major challenge of preparing for the massively increasing load within just a few years.
The legislator recognized the seriousness of the situation some time ago and took countermeasures with the “Network Expansion Acceleration Act” (NABEG), which came into force in 2019. As a central element, the approval procedures for the construction and optimization of power lines have been simplified, which should lead to an acceleration of grid expansion. However, it is questionable whether this acceleration is sufficient to achieve the ambitious goals, as the implementation time for major projects in the network infrastructure - even if everything runs smoothly during the approval processes - should not be underestimated. As part of the large north-south route “SüdLink”, network operator TenneT is talking about completing the Elbe crossing — a 5 kilometer long and 20 meter deep tunnel under the Elbe — by 2028, if everything goes according to plan. Other projects are similar. There is therefore a consensus among experts: Network expansion will also lag behind the expansion of renewables in the medium term, meaning that further measures are required to achieve the ambitious goals.
For example, NABEG is also creating new opportunities for network operators to install additional systems in the”Redispatch“, i.e. to include the realignment of power generation to adapt to grid conditions. Under the umbrella term “Redispatch 2.0”, since October 1, 2021 instead of around 80 conventional power plants across Germany, over 80,000 systems have now been integrated into the redispatch, including mostly medium-sized renewables with a power over 100 kW, which until now could only be switched off via an emergency mechanism called 'feed-in management. '
But there is also a major snag here: Redispatch 2.0 increases the toolbox for network operators, who now have a more powerful, easy-to-plan process for network stabilization. But it is often precisely the renewables used to stabilize the grid, which are actually not supposed to be switched off, but should also be added to the grid. In this way, the network can technically cope with a larger number of shutdowns, but the overall absorption capacity of renewables is not increased. As a result, in regions with severe bottlenecks, it is expected that large portions of renewable electricity will continue to be curtailed rather than used. This is contrary to the goals of the energy transition and sustainable solution options appear to be in short supply.
Price signals on energy markets are a powerful incentive to adjust behavior on the electricity market. For example, we are currently observing massive price peaks, as the market is dominated by renewables during the sunny midday hours, while expensive conventional power plants have to be activated in the evening. Systems that can then store electricity during the day and save it in the evening sometimes generate high profits and at the same time help to dampen price spikes. Such energy storage They therefore have a positive effect on the electricity market and ensure increased stability there.
However, if we are dealing with local network bottlenecks, the incentives are unfortunately not yet working. We have a uniform electricity price in Germany, and whether the electricity is stored or stored in Flensburg or in Füssen is irrelevant to the market price and potential profits. In the future, however, markets will also play a decisive role at local level. In the future energy system, so-called “flexibility markets” have the potential to significantly improve the interaction between market and grid. The introduction of flexibility markets was decided throughout the European Union as part of the so-called “Clean Energy Package” in 2019 and converted into national law by Germany in 2021.
In essence, the current system, which is based on the Redispatch or Redispatch 2.0 described above, is converted from a cost-based system to a market-based system. Flexible resources can then compete for the cheapest way to eliminate a network bottleneck instead of receiving predetermined compensation on a cost basis. In addition to conventional and renewable electricity producers, which are already included in the current, cost-based “Redispatch 2.0” regime, electricity consumers and storage systems (note: storage systems postpone consumption in accordance with the EnWG amendment of July 2022 and are neither producer nor consumer) can then also help eliminate bottlenecks. And in case of doubt, this is more cost-effective than conventional or renewable alternatives. As a result, the costs for the system are reduced, the regulation of renewables is avoided and innovative approaches to provide local flexibility are promoted.
In practice, such a process for a storage system would then look like offering a specific price, for example in order to eliminate a bottleneck due to surplus renewable energy in a specific region. It can do this if it has been discharged beforehand and if it is positioned at a point in the network that is “in front” of the critical bottleneck in the direction of the current flow. The network operator can then compare this price with the costs that would arise as a result of switching off renewables - after all, renewables are entitled to reimbursement of lost marketing revenues. However, it is quite possible that the storage could undercut these costs. Because instead of shutting down the systems and thus destroying the electricity, the storage system can postpone generation until a later point in time when the grid is ready to accept. High profits await especially when electricity is particularly scarce and expensive. For example, if the sun shines during the day and photovoltaic power clogs the grids, a conveniently located storage system can solve this problem at low cost and absorb the electricity. He benefits even more when he sells electricity at higher prices on the market in the evening, and as a pleasant side effect, no need to destroy renewable energy.
In the long term, such revenue opportunities mean that storage systems prefer to settle in regions with more serious network bottlenecks for economic reasons alone — because there they can generate additional income by avoiding network bottlenecks. This provides reasonable investment incentives for storage systems where they are needed most urgently. The overall costs of the system are falling because, from the network operator's point of view, the remuneration for storage — despite profits — is still lower than for the regulation of renewables. And if the storage system has too high price expectations, it goes completely empty and the network operator resorts to switching off the renewables. The electricity consumer cannot lose because grid costs do not rise, but can fall significantly. This is then pleasantly reflected in the electricity bill.
Flexibility markets therefore have great potential to manage existing network bottlenecks more cost-effectively and thus support network expansion. In addition, fewer renewables must be switched off as a result of better utilization of existing networks — overall, a big win for the energy revolution!
However, there are still a number of hurdles on the way to unleashing this potential: Despite the clear direction of the European legal framework in the Clean Energy Package and despite clear implementation in national law, there are problems in practice. Network operators have no legal certainty when passing on costs arising from activating stores or consumers for redispatch. The requirements of national law and the stipulations of the Federal Network Agency are sometimes diametrically contradictory. In this mixed situation, most network operators are playing it safe and, despite sometimes significantly higher costs, continue to switch off renewables instead of using market-based flexibilities. This is compounded by the fact that, in view of the prevailing uncertainty, there is also disagreement among network operators as to what extent newly built storage systems can actually be used to serve the grid. As a result, this often leads to the paradoxical situation that storage systems are more likely to be built where there are no bottlenecks, as the grid operator there has no objection to purely market-driven operation of the storage systems — we remember the exploitation of price fluctuations on the electricity market, which was described above, and which represents a profitable business for battery storage systems even without network bottlenecks.
The investment incentive to set up storage facilities in the right places on the network has unfortunately not yet been set correctly in Germany. Policy and regulation, together with network operators and the storage sector, must urgently find solutions to remove the remaining obstacles. This would be a decisive step towards preparing the power grid for future loads and bringing us a good step closer to the goal of 80% renewables in 2030.
.png){kind=logo}
