Editorial - VGB PowerTech Journal 10/2014

Climate protection and conventional power plants are not opponents Conventional power plants provide backup to the energy transition

The energy transition is making headway – both in Germany and in Europe. A glance at Europe reveals: Almost all European countries promote renewable energy with measures ranging from certificate schemes (Belgium, Denmark) via feed-in tariffs (Germany, Austria), investment-cost subsidies (Netherlands) and bidding processes (France, Portugal) through to combinations of certificates and feed-in tariffs (United Kingdom and Italy).

It seems that among these countries Germany has set itself the most ambitious targets for the expansion of renewable energy: It aims at an 80 % share of renewable energy in energy power production by 2050. Thanks to the feed-in tariffs guaranteed by the German Renewable Energy Sources Act (EEG) for solar PV installations and wind power plants, in particular, Germany is well on its way to achieve this objective. Today already, the installed solar PV capacity amounts to 37 GW. 36 GW have to be added of wind capacity, so that the share of renewables in power production rose to more than 28% in the first half year.

The share of renewables in power production in Germany and in Europe will further increase. As the expansion is progressing, however, the major flaw of renewable energy becomes more and more obvious: Its availability is beyond our control. While today already the feed-in from wind and solar PV sometimes covers more than 60% of the German electricity demand at peak times, its contribution to demand coverage falls to almost zero at other times.

But security of supply must be ensured in the medium to long term even on days when the feed-in from solar PV installations and wind plants is limited. In the foreseeable future, power storage facilities will only be able to make minor contributions in this respect. In the light of the unstable situation in energy policy it also seems very risky to build on imported electricity, especially as the neighbouring countries intend to take a path similar to that of Germany, so that they will need reserve capacity themselves to ensure their own security of supply. Thus, one thing becomes very clear: The energy market of the future will still need a large quantity of domestic, conventional power-plant capacity.

The role played by conventional power plants, however, will change significantly in the process. The previous market segments, i.e. base, intermediate and peak load, will cease to exist. Apart from safeguarding the basic supply of electricity, in future conventional power plants will be increasingly used to reliably deliver electricity also and especially when power from renewables is not available during certain hours of the day or on account of weather-related reasons. For this to happen it is important that we systematically continue the path to making conventional power plants more flexible: From load rate of change via cold-start performance through to minimum load – great progress has already been made here in the past.

In this, climate protection and the operation of conventional coal- and gas-fired power plants do not conflict with each other. In view of the decision to phase out nuclear energy in Germany, a large share of renewables capacity can only be implemented if there is a flexible, fossil-fired power plant system that – acting as a partner to renewables – safeguards power supply at all times. There are also options to make conventional power plants even more climate-friendly: efficiency improvements and carbon capture and storage (CCS). CCS is a climate-protection option that should be kept open and that should be further investigated. The highly positive experience of recent years gained in the operation of our CO₂ scrubbing pilot plant, which we developed together with BASF and Linde, proves us right. Along with renewable energy, CCS can make a crucial long-term contribution towards reducing CO₂ emissions.

Still, one major challenge needs to be tackled on the road to a long-term cooperation between renewables and conventional power plants: Although conventional backup capacityis urgently needed in a market with a high renewables share, it is becoming less and less profitable to operate and keep conventional power plants in standby in today’s energy-only market as a result of declining utilisation rates and the dramatic drop in wholesale electricity prices. We can feel the consequences of this development already today. Gas-fired power plants, which are frequently touted by the media as ideal partners to complement renewables, are hardly operated during the summer these days, with the result that their operators temporarily mothball or even finally decommission them. In addition, the existing market model does not offer economic incentives for power-plant operators to invest in new conventional power plants. This is a very critical issue, not least due to the fact that Europe’s power plants are growing older with each day.

To make sure that conventional power plants as partners to renewables survive on the market, we must urgently develop new market incentive systems, also and especially in view of the long planning and construction times required for new plants. Here, other European countries are already one step ahead of Germany. The discussion in connection with the introduction of capacity mechanisms, which are to remunerate the provision of safeguarded capacity, is still in its early stages in Germany. To establish the model of a decentralised market for safeguarded power, as developed by BDEW and VKU, would be the right way to a customer-oriented, market-based solution. In this case a market for safeguarded capacity would simply be added to the energy-only market. This new market would ensure the provision of the power-plant capacity required for security of supply without financing excess capacities.

In the long run, this is the only way to expand renewables without jeopardising security of supply.