Editorial PT 1-2

Renewables-based generation and supply security

The extension of renewable energies since the Renewable Energy Sources Act (EEG) came into effect in 2000, and the consequential change in energy supply that has been triggered by this act, does not only have a lasting effect on German but also on European electric-ity supply. This extension sets the framework for the future development of our entire generation structure - both technically and politically.
The main challenge will be to secure Germany’s position as an industrial location, and to supply our businesses with competitive, envi-ronmentally friendly, and highly reliably energy. The replacement of previous energy supply, i.e. base-, medium- and peak-load power plants, by increasingly fluctuating wind- and solar-based energy, is highly demanding for generation and grid. The success of the turn-around in energy policy will depend on how we manage to transform our system. The velocity of renewable energies growing urges us to reconsider both the way in which the system works and the structure of future energy supply.
All non-renewable methods of energy conversion are therefore under the pressure of having to prove increased flexibility in comparison with today’s standards - flexibility with regard to meeting short-term residual load requirements, i.e. the remaining percentage between reliable energy supply from conventional power plants and energy available from renewable sources of energy. Since wind power and photovoltaics have a significant influence on the load profile, we can already today witness maximum power fluctuations of more than 40 gigawatts within only a few hours. And the share of renewable energies is going to increase even further in the next few years - in spite of all discussions about the German Renewable Energies Act (EEG). We are therefore talking about dimensions that are equivalent to grid capacities that are - on some days of the year, or at least during some hours - required in the whole of Germany. Current political intentions to increase the use of renewable energy sources continue to focus on the existing Electricity Feed Act for Promoting Renewable Energies (EEG). Since the feed-in of renewables-based electricity is given priority, regardless of the requirements of the system, and since tariffs for renewables-based power are independent of current market prices, the “remaining” generation must ensure balanced energy supply and a high level of flexibility. As a result of the continuously increasing contribution of “EEG“ energy to power generation, the operating hours of conventional power plants are gradually diminishing. The market for conventional power plants is therefore getting tighter with significant effects on their profitability. The efficient operation of plants will be gradually reduced to some hours per year when neither wind blows nor the sun shines. But precisely at this point, the system expects flexible conventional power generation that can be used as a low-cost backup system.
The consequences: The new construction of conventional power plants, e.g. new coal-fired or combined cycle plants, is only profitable at very few sites. The operation of older power plants is also being debated because their capacities are insufficiently utilised. From the viewpoint of market economy, the shutdown of these plants seems inevitable in the short and medium term. However, since the topol-ogy of the grid, that has grown over years and that is not expandable or transformable in the short run, depends on sufficient capacities to maintain its quality and stability, a possible shutdown has, apart from the economic implications, also a gradually increasing impact on the security of energy supply. The tense situation could be relieved by coal-fired power plants that are
currently being built, but this will also be merely a temporary solution to maintain secure energy supply. Because the ageing structure of the German power plant fleet and the shutdown of further nuclear power plants, already agreed upon, will, in the medium term, be an additional burden to the system.
What is the answer? Apart from the further expansion of the grid, mainly investments into power generation plants and storage technologies are urgently needed. However, there is only one aspect that governs the investments into state-of-the-art gas power plants and the new construction of pump storage power plants alike, namely investment decisions have to be economically profitable. Currently, the market situation does not offer any convincing incentives for investment decisions - neither the low operating times nor the low market prices offer an acceptable level of profitability. In the long run, we will therefore have to give some further thought to market design. Already today there is a strong discussion about the question whether capacity incentives, for example, will be required to ensure security of supply. I urge a note of caution: The extent to which capacity markets will, in the long run, be capable of generating incentives for building new power plants without the availability of new subsidies must be carefully examined and discussed. But do we have sufficient time to engage in such a debate? Under one condition only: We must succeed in maintaining the existing conventional power plant fleet for at least this decade. This will not happen without adaptations to ensure that economically unprofitable power plants are technically available to contribute to maintaining supply security- without, however, disturbing the market and without leading to competitive distortions. The reader interested in matters of energy already knows what I am driving at: What we need is a so-called “strategic reserve” of existing power plant capacities that might be unprofitable but nevertheless capable of ensuring sufficient time to reflect on the layout of our market design not only in Germany but also in cooperation with our European neighbours and partners.
This is what the energy transition should at least be worth to us.