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High Renewable Energy Costs Damage the German Economy

German renewables and costs

In September 2010, the German government announced a new energy policy with the target of increasing the relative share of renewable energy in gross electrical generation to 35% by 2020, 50% by 2030, 65% by 2040, and 80% by 2050. Germany has been increasing its renewable energy generation from 6.6% (mostly existing hydro) in 2000, when the EEG law took effect, to 23.4% of total generation, at the end of 2013. If current RE growth continues, Germany likely will meet the 2020 target.

Energy Generation in Germany: At the end of 2013, German energy sources were 25.6% lignite coal, 15.4% nuclear, 19.6% hard coal, 10.5% natural gas, 1.0% mineral oil, 4..0% Other, for a total of 76.1% from non-RE sources, plus 8.4% wind, 3.2% hydro, 6.7% biomass, 4.7% PV solar, 0.8% Municipal waste, for a total of 23.9% from RE sources.

http://www.ag-energiebilanzen.de/

For the years 2008 – 2013:

……………………………………2008…….2009…….2010…….2011…….2012…….2013

Total generation, GWh…….640,700…595,600…633,000…613,100…629,800…633,600 

Total RE, GWh……………….93,200…..94,900…104,800…123,800…143,500…151,700 

Total EEG RE, GWh………. 71,148…..75,377…..82,332…103,136…118,330…132,400 

EEG fraction, %……………….76.3………79.4…….78.6…….83.3………82.5…….87.3

http://www.ag-energiebilanzen.de/ 

Coal Generation in Germany: The below data show German coal generation is increasing, and will continue to increase for the next 10 – 20 years, as near-CO2-free nuclear plants are decommissioned and replaced with additional RE and new coal plants. Late-vintage, modern, coal-fired plants are more efficient, have less CO2 emissions, gram/kWh, than older plants near retirement.

Here is the coal generation, TWh, for the years 1991 and 2008 – 2013:

…………………….1991…….2008…….2009…….2010…..2011…….2012……2013

Braunkolle……….158.3……150.6……145.6……145.9…..150.1…..160.7……162.0

Steinkolle………..149.8……148.8……107.9……117.0…..112.4…..116.4……124.0

Total coal………..308.1……299.4……253.5……262.9…..262.5…..277.1……286.0

Coal fraction, %……………..43.0……..42.6…….41.5…….42.8……44.0……..45.2 

The energy of nuclear plants is being replaced with energy from coal plants and renewables.

http://www.ag-energiebilanzen.de/

CO2 Emissions in Germany, million metric ton, for the years 2010 – 2014:

Based on the data in the below table, it will not be possible for Germany to have emissions of 749 million metric ton, i.e., 40% below the Kyoto 1990 emissions of 1,249 million metric ton.

Germany’s Kyoto 1990 emissions are high, because East Germany is included. By retiring East Germany’s old, inefficient coal plants, and replacing them with new ones, Germany has been able to brag about its large reductions of CO2 emissions. See figure 12 of below URL of Agora report.

The targets of 2030 and 2050 would require shutting down most coal plants, which likely would not happen, as the newly-built, flexible ones are needed for balancing the variable, intermittent wind and solar energy, and to provide capacity adequacy. See below sections.

Increased coal use occurred in 2012 and 2013. This will be ongoing for many years, as new coal plants are brought on line and nuclear plants are decommissioned. 2010 was a colder year, requiring increased fossil fuel for heating; 2014 was a warmer year.

Year……..2009……2010…..2011……2012…..2013….2014….2020….2030…..2050

CO2………910………947…….929……..940…….953……912

Below Kyoto1990, %………..25.6…….24.7……23.8…..27.0……40………55……80-95

http://earthtechling.com/2013/02/german-carbon-cutting-hits-a-coal-speed...

http://www.earthtechling.com/wp-content/uploads/2013/02/germany-emission...

http://reneweconomy.com.au/2013/the-energiewende-germanys-energy-transfo...

http://reneweconomy.com.au/2013/energiewende-the-german-energy-transform...

http://www.agora-energiewende.org/fileadmin/downloads/publikationen/Anal...

Dim Physical Prospects for Cost-Efficient RE in Germany: Heavily-industrialized Germany is building its ENERGIEWENDE on mediocre wind and mediocre solar, with biomass not scaling up! In 2012, Germany’s onshore wind capacity factor was 0.192, and PV solar CF was 0.095; NIMBY will prevent future significant build-outs of onshore wind turbines, and offshore wind turbine energy cost is at least 2 times onshore.

Because of a lack of cropland, biomass could at most produce about 10%, versus 6.8% in 2013, and because of a lack of suitable geography, hydro could at most produce about 5%, versus 3.4% in 2013. Yet Germany is charging ahead anyway, but uneasiness about the ENERGIEWENDE feasibility and cost is finally beginning to creep into the minds of more and more policymakers.

Adding Renewable Energy Increasingly More Costly: Renewable energy production covered by the EEG law increased from 71,148 in 2008 to 132,400 GWh in 2013, an 86% increase, and the EEG surcharge on household electric bills increased from 1.1 in 2008 to 5.227 eurocent/kWh in 2013, a 375% increase, i.e., as each GWh of RE is added, it costs more to produce and integrate it into the energy system, akin to climbing a mountain, initially, it is easy going, but further along, it becomes harder and harder, as its gets colder and the air gets thinner.

The EEG surcharge increase took place despite improved efficiencies and lower costs/MW of RE technologies, and some reductions of the excessive PV solar feed-in tariffs.

RE Costs Adversely Impacts Household Electric Rates: The average annual electric bill of a 3-person German household was 598.80 euro in 1998, with an annual energy surcharge of 2.80 euro, increased to 1005.60 euro, with an annual EEG surcharge of 184.70 euro, likely to increase to 220 euro in 2014.

http://www.epaw.org/documents.php?lang=en&article=in25

EEG surcharges were 0.8, 1.0, 1.1, 1.3, 2.05, 3.53, 3.592, 5.227, 6.24 eurocent/kWh, excl. 16% VAT, from 2006 to 2014, with annual increases of 1.0 – 1.5 eurocent/kWh to follow, a politically untenable situation.

German household electric rates increased in about a straight line from 13.94 in April 2000 (start of EEG law), to 21.65 in April 2008, to 28.73 eurocent/kWh in April 2013.

German household electric rates, 29.65 eurocent/kWh in December 2013, were the 2nd highest in Europe, after Denmark’s 30.45 eurocent/kWh. France, 80% nuclear, was at 15.48 eurocent/kWh. See URL for breakdown of electric bill charges per kWh.

Total household cost…………………………………..29.650

– VAT……………………………………………………4.744…………………16% of Total

– EEG surcharge………………………………………5.227

– Other taxes and levies…………………………….4.772*

VAT, EEG, Other………………………………………….14.743……..49.72% of Total

Utility energy……………………………………………5.5

Utility service, distribution…………………………..1.407

Utility operations……………………………………….8.0

Utility Energy, Service, Operations…………………14.907……..50.28% of Total

* Includes: Energy tax; Offshore hafnungsumlage; Parapraph 19 umlage; KWK aufschlag; Konzessions ausgabe.

http://www.eurotrib.com/story/2013/7/2/174936/9080

http://www.energypriceindex.com/wp-content/uploads/2013/12/HEPI_Press_Re...

https://www.bdew.de/internet.nsf/id/9D1CF269C1282487C1257E22002BC8DD/$file/150409%20BDEW%20zum%20Strompreis%20der%20Haushalte%20Anhang.pdf

Regarding the above 5.5 eurocent/kWh, this URL, figure 10, shows wholesale prices of about 5.5 eurocent/kWh for all of Europe in 2010, 2011, 2012 and half of 2013.

http://ec.europa.eu/energy/observatory/electricity/doc/20130814_q2_quart...

_electricity_markets.pdf

Using utility wholesale prices of about 5.5 eurocent/kWh at a basis, the EEG surcharge calculates to 5,227/5.5 = 95% of energy in 2013, and 6.24/5.5 = 113% of energy in 2014.

RE Capacity, Production, Capital Cost Summary, 2000 – 2014 period

Below is a summary of RE systems capacity, production and capital cost for the 2000 – 2014 period. The values for end 1999 are used as a starting point and shown below. The values of each year thereafter were obtained from published sources, and summed. The summed values at end 2013 are shown below. The values for 2014 are estimated and shown below.

End 1999………..Wind, onshore…..Wind, offshore…..Biomass…..Solar………Total

Capacity, MW…….4,435……………….0………………..250………….70

RE, GWh…………..5,528……………….0……………..1,200………….42………..6,770

Cap. Cost, b euro…8.87………………..0……………….0.75…………0.6……….10.22

End 2013

Capacity, MW……..34.250……………520……………..7,150………35,692

Energy, GWh………53,400……………722…………….42,600……..30,000……126,722

Cap. Cost, b euro…..68.50……………2.13…………….21.29……..107.37…….199.30

During 2014

Capacity, MW……..2,500………………100……………….100……….2,750

Energy, GWh………4,161………………394……………….613……….2,409………7,643

Cap. Cost, b euro…..5.0……………….0.42………………0.25………..5.5……….11.17

ADDITIONAL capital cost = (199.30 – 10.22) + 11.17 in 2014 = 200.2 b euro.

ADDITIONAL RE = (126,722 – 6,770) + 7,643 in 2014 = 127,595 GWh, or 20.14% of total generation.

Total RE end 2014 = 151,700, end 2013 + 7,643 in 2014 = 159,343 GWh, or 25.15% of total generation.

The 200.2 b euro does not include the capital costs of additional balancing capacity build-outs, MW, and grid build-outs, estimated at about 40 b euro, which Germany should have made, but largely did not. As a result, Germany has to frequently use the grids of nearby nations to balance its variable wind and solar energy.

The total EEG surcharge on electric bills was about 111.6 b euro, for the 2000 – 2014 period. About 1.5 million ratepayers (households, etc.), with PV systems, avoided buying some of their electricity from the grid, but the other 30 million households, without PV systems, mostly less well off, bore the full brunt of the surcharge.

http://www.ag-energiebilanzen.de/

Note the growth of biomass energy:

https://mail.google.com/mail/?shva=1#inbox/146110960272188d?projector=1

NOTE: Nuclear energy would have been a more rational alternative for the added generation:

Nuclear production: 16,184 MW x 8,760 hr/yr x CF 0.9 = 127,595 GWh, at a capital cost of about 80.92 b euro (at $5000/kW for standard plants); no balancing capacity and grid build-outs would be required. Nuclear plants last for about 60 years, whereas, RE systems last only 20 – 30 years. Also, standard nuclear plants would produce energy at about half the cost of RE systems.

High Renewable Energy Costs: It is useful to look at the RE costs of Germany’s ENERGIEWENDE. For the years 2008 – 2013:

………………………………….2008……..2009……2010……2011…….2012…….2013

EEG generation, GWh…….71,148….75,377…..82,332…103,136…118,330…132,400

EEG payments, b euro………9.0………10.8…….13.2……16.8………21.1…….22.9 

EEG cost, euro/kWh……….0.1265….0.1433…..0.1603…0.1629….0.1783….0.1730 

EEG subsidies, b euro……….0.0……….0.0………0.0……..1.1……….1.0………4.2 

EEG total, b euro…………….9.0………10.8…….13.2…….17.9……..22.1…….27.1 

EEG cost, euro/kWh……….0.1265….0.1433…..0.1603…0.1736….0.1868….0.2047 

EEG revenues, b euro……….4.3……….5.5………3.8……..4.7……….5.1……..6.7

EEG price, euro/kWh………0.0604….0.0730…..0.0462…0.0562….0.0431….0.0506

Sold at about 0.0506/0.2047 = 1/4 of the cost in 2013.

EEG surcharges, b euro…….4.7……….5.3………9.4………13.2…….17.0…….20.4

Estimated at 23.6 b euro in 2014

http://www.germanenergyblog.de/wp-content/uploads/2014/01/BT-Drs_18_242_...

Renewable Energy Sold at a Loss: In Germany, the normal procedure is to use materials and labor to make a product and sell it at a profit. It is just the opposite with RE, where the normal procedure is to use materials and labor to make a product that is sold at 1/4 of the cost, i.e., at a loss which is made up by placing a surcharge on household electric bills. This is completely uneconomic and irrational.

People think the Germans are so smart, but selling 2013 RE at 1/4 of the cost is unwise, AND it is unsustainable, because, as RE increases in future years, the cost/kWh increases, and the fraction at which the RE can be sold decreases. When standing in a deep pit, it is wise to stop digging.

High RE Costs Damage German Economy: Germany’s exports would have been 15 b euro higher in 2013, if its industry had not paid a premium for electricity compared with international competitors, according to an analysis published on Thursday. Germany’s manufacturing suffered 52 b euro in net export losses for the six-year period from 2008 to 2013, per the Financial Times of 27 February, 2014.

Managing Renewable Energy on the Grid: Without variable RE, Germany has the most reliable grid in the world. If, instead of exporting energy to nearby nations during windy and sunny periods, Germany had to keep its variable wind and solar energy within its borders, there would be chaos, as Germany has failed to make the investments in grid infrastructure, tens of billions of euros, to match its rapid RE build-outs.

The northern German grid has limited ability to deal with variable energy. Because traditional generators dominate the grid, frequency and voltage are maintained within required ranges for stability, even with some variable energy on the grid. But during periods of low demand with windiness, usually at night, the variable wind energy is excessive and is either curtailed (wind turbine owners object), or spread out to other grids (at very low prices), such as of The Netherlands, Belgium, Poland, Sweden, etc., to maintain stability, i.e., exported at a loss!

The southern German grid also has limited ability to deal with variable energy. Because traditional generators dominate the grid, frequency and voltage are maintained within required ranges for stability, even with some variable energy on the grid. But during periods of clear skies, the variable solar energy is excessive (cannot be curtailed, except by grounding some of it) and is spread out to other grids (at very low prices), such as of Austria, The Czech Republic, France, etc., to maintain stability, i.e., exported at a loss!

RE promoters crowing about Germany being able to export energy while closing down nuclear plants, or about Germany generating 50% of its energy with RE on a particular hour of a day, or Germany’s RE reducing wholesale energy costs, are mentioning the parts of the picture favorable to their cause, but leave out the other parts, i.e.,  misrepresenting reality, to say the least.

http://www.agora-energiewende.de/service/aktuelle-stromdaten/stromerzeug...

A third way could exist if Germany had a north-south, HVDC, overlay grid, but that would cost at least 50 to 75 billion euro, if buried, and would take about 5 – 10 years to place in service. Building it overhead would be less costly, more visible, but would be delayed by much NIMBY. The HVDC grid would be connected to the existing high voltage grids at many points to spread out the variable energy all over Germany, i.e., less need to rely on money-losing exports for balancing.

Germany Using Foreign Grids For RE Balancing: As above noted, Germany, not having sufficient domestic RE balancing capacity, MW, uses the spare balancing capacity of the grids of nearby nations to balance its excessive energy during high RE production periods. These nations provide these services, because the surplus energy is received at a very low cost/kWh, usually much lower than they could produce it with their own generators. Also these nations have not much use for their spare balancing capacity, as their RE build-outs proceeded at a much slower pace than Germany’s. This mode of operation cannot be long-term, as these nations ultimately will have greater RE production, and greater need of their own balancing capacity, i.e., Germany will have to make additional investments in balancing capacity.

Balancing the energy is part of the problem. The other part is adequate import and export transmission capacity. At present, Germany has about 12,597.85 MW of import and export capacity with neighboring countries. As future RE generation increases on sunny, windy days, this transmission capacity may be exceeded and RE production curtailment will be required.

http://www.reuters.com/article/2014/02/12/us-austria-energy-germany-idUS...

http://www.germanenergyblog.de/?p=16039

Denmark Using Foreign Grids For RE Balancing: For more than 35 years, Denmark has used the grids of Sweden and Norway, each with significant hydro-plant capacity, MW, for balancing its excessive energy during high wind energy periods.

As Denmark aims to increase its wind energy from just over 30% of its total generation in 2012 to 50% in 2020, mostly from offshore, Denmark will become an energy exporter during almost all hours of the year, but the wholesale export prices are about 0.25 DKK/kWh x 13 eurocent/DKK = 3.25 eurocent/kWh, whereas offshore wind energy costs about 1.05 DKK x 13 eurocent/DKK = 13.65 eurocent/kWh, 4.2 times greater. Danish climate and energy minister Petersen has threatened to cancel 1,000 MW of offshore wind turbine plants, unless their energy prices are lowered.

The difference in price is via the green electricity tax, the PSO levy, to the tune of 1.3 billion DKK/yr, mostly paid by Danish households, instead of industry, as not to impair industrial competitiveness. How going to 50% wind energy is a wealth generator for Denmark remains a mystery.

http://cphpost.dk/news/energy-minister-ready-to-scrap-offshore-wind-farm...

At present, the hydro plants of Norway and Sweden act as a balancing and storage utility for Denmark. The more wind energy Denmark generates, the more it needs that “battery”. Denmark pays for this by delivering energy at low grid prices and absorbing it at high grid prices. The exact $ amount appears to be a state secret; it has been estimated at well over 1 b euro some years ago. As much of the additional Danish wind energy will be offshore, that 1 billion likely will double or triple. Danish households already have the highest electric rates in Europe; 30.45 eurocent/kWh in December 2013.

http://www.eurotrib.com/story/2013/7/2/174936/9080

http://www.energypriceindex.com/wp-content/uploads/2013/12/HEPI_Press_Re...

In 2002, Denmark had so little winds that during 54 days no wind energy was produced, but the wind turbines were consuming energy, a.k.a., parasitic energy, just the same. There likely was an additional 50 or so days with minimal energy production.

http://en.wikipedia.org/wiki/Wind_power_grid_integration

Luckily, Denmark’s OTHER coal, gas, nuclear, generators, and the hydro plants of Norway and Sweden provided the shortfall, but with Denmark’s current annual wind energy percent on the grid, this would be a significantly greater effort.

Whereas, weather systems tend to cover large geographical areas, at that time, the lack of wind energy generation was noticed mostly in Denmark, as other nations had much fewer wind turbines, which would not be the case at present and going forward. Something for many nations to think about for planning purposes.

Spain Using Its Own Grid For RE Balancing: Spain, with an “island” grid with weak connections to nearby nations, uses gas-fired OCGTs and CCGTs, and pumped storage hydro plants to balance its RE. Spain has a feed-in tariff regime similar to Germany, but, instead of surcharges on household electric bills, the net feed-in tariff costs were added to the national debt, causing the people to think RE as having no cost!!

This grand deception, approved with much crowing by RE aficionados, to promote Spanish-style RE build-outs, added to other economic mismanagements/deceptions, ultimately caused an unemployment rate of 25% for workers aged 25 and over, and 50% for workers under 25. As Europe is in near-zero population and near-zero economic growth, it will be decades before Spain will have an overall unemployment rate of 8%, the same as in June 2007.

http://www.tradingeconomics.com/spain/unemployment-rate

Balancing Adequacy, Capacity Adequacy and Grid Adequacy Costs due to RE on the Grid: The above EEG surcharges do not cover any costs and energy losses, with attendant CO2 emissions, for:

– Balancing, the variable energy by the OTHER generators (increased start/stop operation, increased 3,600 rpm spinning operation, increased part-load-ramping operation), and having an increasing capacity, MW, of generators for balancing.

– Providing “capacity adequacy”, i.e., having sufficient capacity of a suitable mix of generators, staffed, fueled, maintained in ready-to-serve status, during ALL hours of the year, especially during the 65% of the hours of the year PV solar energy is minimal, and during the 30% of the hours of the year wind energy is minimal.

– Grid expansion to connect distributed wind turbine plants to the grid, reinforce the grid to distribute the energy, and maintain the required stability. The grid capital cost ranges from about 15% to 30% of the installed capital cost of the wind turbines, depending on the condition of the existing grid, extend of grid modifications, and the distance of the wind turbines from population centers. See URL for cost examples.

http://theenergycollective.com/willem-post/310631/more-realistic-cost-wi...

These costs have led to the OTHER generators, utilities and grid owners experiencing reduced profits and operating losses. When RE was insignificant, those losses were minor and absorbed, but as RE increases those losses increase and cannot be absorbed without consequences, i.e., providing them with proper compensation.

Whereas, claims are made by RE promoters regarding RE reducing grid prices, they cannot be backed up or refuted. Heavily-subsidized RE, with priority access to the grid, may artificially depress costs in one area, such as grid prices, but increase costs in other areas that are not obvious and not traced.

The extra costs to grid owners and generator owners to deal with RE are spread out over the entire German energy system and are difficult to trace, as historic accounting systems are not set up for that purpose. A whole new system of identifying, measuring and recording of costs will be required for proper cost accounting and subsequent compensation.

http://theenergycollective.com/willem-post/310631/more-realistic-cost-wi...

NOTE: Wind turbine energy to the grid = Production – Parasitic energy. At low rotor RPM, the parasitic energy may become greater than the production, and energy is drawn from the grid for wind turbine electrical requirements. In areas with low CFs, as in Germany, the parasitic energy is a significant part of production. See URL.

http://windfarmrealities.org/u-minn-and-vestas-reality-check/

NOTE: Economically-viable, utility-scale, energy storage would enable storing energy for later use, as with pumped hydro, but such storage has not been invented and would take 10 – 20 years to deploy AFTER its invention.

Japan, which imports almost all of its energy, has installed much solar capacity, MW, but its grid cannot balance the energy. As a result, the government will spend $204 million on the world’s largest battery bank to stabilize the flow of solar energy. This is the first battery bank of this size to be installed at a utility substation. Capable of storing 60 MWh of energy, it will be operational by early 2015. The battery operating range will be about 20 – 90% of battery capacity, i.e., the usable storage is 42 MWh of energy, to ensure lives of at least 7 years. The battery DC inflows of solar energy will be variable, the AC energy outflows will be controlled within grid required standards. A to Z system losses will be about 15 – 20%. It will be located on the island of Hokkaido where inexpensive land is attracting many solar projects.

http://www.sustainablebusiness.com/index.cfm/go/news.display/id/24781

CO2 Emissions and the EEG Program: Germany’s annual CO2 emissions will be INCREASING as more near-CO2-free, nuclear plants are decommissioned and replaced with CO2-emitting, coal-fired plants, during the next 10 – 20 years, even though RE, as a percent of total generation, would increase, which would further increase the above-mentioned losses, and require higher EEG surcharges on household electric bills. When standing in a deep pit, it is wise to stop digging.

I, and many others, have been writing about this for some years, and it seems to have finally sunk in at the highest level.

REVISING THE EEG PROGRAM IS LONG OVERDUE

Revising EEG Mandates and Targets: The newly-formed German coalition government wants to revise the share of RE in the German energy generation mix to be 40% to 45% by 2025, instead of the current 50% by 2030, and to be 55% to 60% by 2035, instead of current 65% by 2040, to increase flexibility. The new German Economics and Energy minister, Sigmar Gabriel, stated green energy mandates have become such an albatross around the neck of industry that they could lead to a “deindustrialization” of Germany.

Revising EU Framework on Climate and Energy: On 22 January 2014, as part of the new EU framework on climate and energy, the European Commission proposed a 40% reduction target (not a mandate) for greenhouse gas (GHG) emissions below the 1990 (Kyoto) level, from all sources, not just energy generation, by 2030.

The European Council will discuss the proposal during the next 12 months. If approved (which may not happen), it will be offered as a conditional pledge during the international negotiations on climate change in Paris in 2015.

http://www.germanenergyblog.de/?p=15148

http://www.germanenergyblog.de/?p=15302

http://www.thegwpf.org/europes-climate-targets-myth-reality/

EEG Program Not Cost-Efficient and Ineffective: While the German coalition government is in the process of revising the Renewable Energy Sources Act (EEG), the Commission of Experts on Research and Innovation (Expertenkommission Forschung und Innovation – EFI), recommends abolishing the EEG program.

The EFI claims, the EEG program was neither a cost-efficient climate protection tool, nor did it have a positive effect on innovation. The study team presented its 2014 annual report, in German, to Chancellor Merkel on 26 February, 2014. The English version will be issued in June 2014.

http://www.germanenergyblog.de/?p=15384#more-15384

http://www.e-fi.de/fileadmin/Gutachten_2014/EFI_Gutachten_2014.pdf

Revising the EEG Program: If by 2025, Germany had 40% to 45% of electrical energy from RE, the EEG surcharge, based on its historic progression, would likely be about 24 eurocent/kWh, or about 24/5.5 = 4.4 times utility energy cost, based on current feed-in tariff schedules, and current capacity expansion plans.

However, to contain excessive costs, the German coalition government is revising the EEG program by introducing capacity expansion caps/corridors, and cuts in financial support for onshore wind energy, offshore wind energy, solar energy and biomass energy. See URLs.

http://www.germanenergyblog.de/?p=15159

http://www.germanenergyblog.de/?p=15302 

Reducing Feed-in Tariffs and RE Build-outs: To limit the damage of RE build-outs to German’s heavy industries, traditional utilities, and other businesses, Germany’s government is planning to reduce EEG feed-in tariffs, effective at the start of 2015, from a weighted average of 0.1730 euro/kWh in 2013, to a weighted average of 0.12 euro/kWh in 2015.

This reduction will apply only to NEW RE systems under the EEG law, i.e., future INCREASES in EEG surcharges on electric bills may be only SLIGHTLY less than they would have been, because EEG payments to generators, etc.:

– Will be decreasing for systems prior to start of 2015, per existing feed-in tariff schedules.

– Will be increasing for systems built in 2015 and after, per new feed-in tariff schedules. 

EEG surcharges on electric bills, 23.6 b euro (est.) at about 25.14% RE in 2014, up from 23.94% at end 2013, will continue to increase as more RE is added by 2030, taking into account the proposed decreased feed-in tariffs at start of 2015.

Also, future build-outs, MW, of solar, wind, etc., will be constrained within MW corridors, with the feed-in tariffs adjusted to stay within the corridors.

This is not a trivial reduction, as it will significantly slow the build-out of RE systems all over Germany, including offshore wind turbines plants. How that will enable Germany to meet its 2030 CO2 targets is a technical mystery, especially with additional coal plants coming on line, and nuclear plants retiring.

http://www.germanenergyblog.de/?p=15159

RE businesses and organizations will be howling, as if THE world is coming to an end, whereas, in fact, it is just a part of THEIR world, but there was a sigh of relief from other households and businesses, as sanity is starting to prevail after all.

NOTE: The only quick way for easing the burden on households is to eliminate the 16% VAT on electric bills.

ESTIMATED SURCHARGE AND COSTS by 2030 UNDER REVISED EEG PROGRAM 

If the above proposed weighted average feed-in tariff of 0.12 euro/kWh were implemented at the start of 2015, an estimate of the EEG surcharge on household electric bills could be calculated as follows:

Estimated EEG Surcharge: German total generation was 633,600 GWh at end 2013. Assume it remains unchanged during the 2015 – 2030 period.

Germany’s target is 50% RE by 2030 = 316,800 GWh, of which 151,700 GWh was already in place at end 2013. With 159,343 GWh at end 2014 (see below), about 157,457 GWh is to be added during the 2015 – 2030 period.

Extra cost/kWh = 12 – 5 = 7 eurocent/kWh, assuming an average wholesale price at 5 c/kW for the 2015 – 2030 period. Much of the new wind energy will be offshore, and its unsubsidized energy cost is likely to be 15 – 20 eurocent/kWh.

Approximate EEG surcharges MOSTLY ON HOUSEHOLD ELECTRIC BILLS = 0.07 x 157,457,000,000 kWh = $11.02 b euro; this item increases from zero at the start of 2015 to 11.02 b euro at the end of 2030.

This slowly increasing amount is in addition to the 23.6 b euro (est) in 2014, say $24.5 b euro in 2015, which will be slowly declining, per existing feed-in tariff schedules.

Estimated RE and Capital Cost: The Federal Ministry for Economic Affairs and Energy (“BMWi”) has drafted a first working vision of a revised German Renewables Energy Sources Act (EEG). This first draft led to further clarification of the EEG 2.0 program, i.e. the reform of the EEG.

http://www.germanenergyblog.de/?p=15302

The draft revision includes 2030 capacity targets, GW, for new onshore wind, new offshore wind, new solar, new biomass, but no targets for hydro and geothermal energy.

Germany’s total generation was 633,600 GWh in 2013. Assume it remains unchanged from start 2015 to end 2030, 16 years.  New RE at end 2030 = 50% x 633,600 – RE in place at start of 2015 = 316,800 – 159,343 = 157,457 GWh.

New RE: The new RE production, GWh, in 2030 is estimated as follows:

…………………………….Capacity, GW………….CF…………….Production, GWh

New wind onshore…….2.5 GW/yr x 16 yrs…….0.195……………..68,328

New wind offshore…….15 GW by 2030…………0.40*……………..52,560 

New solar………………..3 GW/yr x 16 yrs……..0.095………………39,946 

New biomass…………..1.6 GW by 2030………...0.70……………………….9,811

Total new RE = 170,645 GWh

* The Alpha Ventus offshore project, near Borkum, North Sea, 12 units, 5 MW each, 600 ft tall, capital cost 250 m euro, or 4,200 euro/kW, had a CF of 0.482 over a 3-yr operating period (2011, 2012, 2013). Not all locations are that windy. It would be a challenge to find enough offshore sites for 15,000 MW of turbine plants to achieve an average CF of 0.40.

http://en.wikipedia.org/wiki/Alpha_ventus

*  Windpark Noordoostpolder, onshore/near-shore, Ijselmeer, 48 units 3.6 MW, plus 38 units 7.58 MW = 450 MW, capital cost 1 b euro, or 2,220 euro/kW, CF of 0.355.

http://en.wikipedia.org/wiki/Windpark_Noordoostpolder

The proposed new GW, installed per growth targets, would produce a few percent in excess of the above 157,457 GWh, however, performance of existing and new systems degrades with age.

Capital Cost: The capital cost of the proposed new RE capacity is estimated as follows:

…………………………..Cost, m euro/MW…….Capacity, MW……..Capital Cost, b euro

New wind onshore………….2……………….40,000………………….80 

New wind offshore………..4.2………………15,000………………….63 

New solar……………………2………………..48,000………………….96

New biomass………………2.5………………..1,600…………………..4

Total new capital cost by 2030 = 243 b euro.

The new capital cost excludes:

– EEG supplementary payments, 4.2 b euro in 2013, likely increasing in future years. See above.

– Onshore/Offshore transmission system build-outs, about 75 b euro, if buried on shore.

– Capital costs and O&M costs for balancing and backup build-outs, billions of euros, as Germany cannot continue to use neighbors’ grids for that purpose.

Capital costs and O&M costs for maintaining “capacity adequacy” of conventional generating units for when wind and solar energy are insufficient.

The end result will be, absent utility-scale, economically viable energy storage (not yet invented), a capacity of RE systems that produces expensive energy, plus a capacity of conventional energy systems for “capacity adequacy”. The levelized cost of such a dual energy system will be about 2 – 3 times greater than without the RE systems.

EEG Capital and Surcharge Cost Summary:

This section has an estimate of the capital and surcharge costs of the EEG-1 phase; start 2000 – end 2014 (15 years), and EEG-2 phase; start 2015 – end 2030 (16 years). The assumptions take into account the EEG surcharge build-up and wind-down periods of RE systems built during the phases. RE subsidies are for 20 years.  

EEG – 1

The total EEG-1 surcharges on electric bills increased from zero at start of 2000 to about 24.5 b euro in 2014, will be decreasing to zero by end of 2034.

Costs During the EEG-1 Build-up and Wind-down Period:

Surcharge during build-up from start 2000 to end 2014, b euro………………..111.6

Surcharge during wind-down from start 2015 to end 2034, b euro…………….275.8

Total surcharge, b euro…………………………………………………………………….387.4

In addition, 200.2 b euro capital cost to build out the RE systems (calculated above), which typically last only 20 – 25 years!!

Costs, such as grid build-outs, capacity adequacy, balancing losses, etc., are not included.

EEG – 2

The total EEG-2 surcharges on electric bills increased from zero at start of 2015 to about 11.7 b euro in 2030, will be decreasing to zero by end of 2050.

Costs During the EEG-2 Build-up and Wind-down Period:

Surcharge during build-up from start 2015 to end 2030, b euro………………..102.3

Surcharge during wind-down from start 2031 to end 2050, b euro…………….111.0

Total surcharge, b euro………………………………………………………………………213.2

In addition, 243.0 b euro capital cost to build out the RE systems (calculated above), which typically last only 20 – 25 years!!

Costs, such as grid build-outs, capacity adequacy, balancing losses, etc., are not included.

NOTES:

– RE systems installed at the start of 2000 receive feed-in rates to the end of 2019, i.e., for 20 years, etc.

– (EEG-1 + EEG-2) surcharge peaks at about 25.68 b euro during 2019, will be decreasing to zero by end of 2050.

Additional sources:

http://uk.news.yahoo.com/german-industrial-risk-green-energy-shift-fails-151906863–business.html#WHnUaZp

http://wwww.polderpv.nl/PV_weltmeister_2010_II.htm

http://www.irena.org/DocumentDownloads/2013/January/Workshop/German%20Re...

http://en.wikipedia.org/wiki/Renewable_energy_in_Germany

http://www.eurotrib.com/story/2013/7/2/174936/9080

http://epp.eurostat.ec.europa.eu/statistics_explained/index.php/Energy_p...

http://studentenergy.org/blog/germany-energy-profile/

Photo Credit: Germany and Renewables Cost/shutterstock

 

 

 

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Discussions

Clayton Handleman's picture
Clayton Handleman on Mar 6, 2014 6:15 pm GMT

“Seems you are far better with google than me!”

Its a hobby : )

 

Don’t get to travel as much as I would like so I do a lot of google and Flickr site seeing.

Bas Gresnigt's picture
Bas Gresnigt on Mar 6, 2014 9:22 pm GMT

Willem,

They are also planned for a.o. the ~400MW wind park in Drenthe in the east of NL (no  dikes), as well as in Belgium, etc. as stated in the previously linked Wikipedia page. Those 7.5MW wind turbines are in serial production.

Btw.
Sleeswijk-Holstein, which opposes minister Gabriels plan to prioritise offshore, got openly support from at least three other Bundesländer (states)
 – Offshore too expensive, onshore cheaper.
 – The four states have more than enough space for all wind capacity needed.
 – No sudden boom of onshore wind to be expected.
The solar boom in 2011/2012 harmed, as it was not predicted which hinders German government most, IMHO.

While Gabriel wants to increase offfshore wind as there is (economic and political) space for the extra increase of the Energiewende levy (consequence of extra Offshore wind capacity), the open oppostion of the four Bundesländer make it politcally difficult for Gabriel.
So I assume a compromise, such as ~85% onshore and ~15% offshore.

Nathan Wilson's picture
Nathan Wilson on Mar 7, 2014 5:07 am GMT

Sorry, but it is a gross distortion to state energy costs decades in the future without correcting for inflation. In other words, by stating the inflation adjusted price of Hinkley’s nuclear power costs as though it were in today’s dollars, misrepresents the meaning of the numbers.  The future affordability of the energy from Hinkely will be the same as it is on day one – that’s the point of the inflation adjustment.

Also, focusing on the Hinkely contract ignores the fact that cost of subsequent nuclear plants is expected to be lower than at Hinkley.  In fact, the Hinkley contract states that Hinkley prices will automatically be reduced if a second EPR project by the same developer goes forward.

It is also optimistic to assume that the cost of renewables will not rise with inflation.

Bas Gresnigt's picture
Bas Gresnigt on Mar 7, 2014 12:17 pm GMT

Compared to USA and Vermont, Drenthe is densily populated…
Similar with the other three Dutch wind parks that want to use the 7.5MW turbine.

Thanks for the info about the new targets.

Is there agreement with the presidents of the four opposing Bundesländer?
Looking at the relative high offshore wind target, I feel not sure.

May be they agreed informally to shift most offshore installation towards after 2023 when the Energiewende levy is projected to go down (so there is then extra financlal space), and offshore is expected to have become cheaper (bigger, more reliable wind turbines, better ships to install them, etc)..

While formally not necessary, those Bundesländer (especially Sleeswijk-Holstein) can block in practice by delaying procedures, refusing licenses, etc.

Bas Gresnigt's picture
Bas Gresnigt on Mar 7, 2014 12:49 pm GMT

Denmark also gets lower prices thanks to that trade.

The variable costs of wind electricity are near zero. So mostly selling to Norway, Sweden, Germany brings more money than stopping the wind turbine.

When there is no wind they can buy from Germany (which they do a lot), Sweden, Norway utilities. Those compete at the whole sale market.

Danish utilities wiil buy only international if those prices are lower than the costs to generate themselves, using e.g. gas plants.

So I do not see a sad part.

Nathan Wilson's picture
Nathan Wilson on Mar 7, 2014 3:11 pm GMT

Bas, you’re analysis always seem to forget that solar and wind have low capacity factor and poor demand correlation.  So even though they are growing rapidly now, they will eventually saturate when the penetration equals the capacity factor.  Then the next wind farm built will make essentially all of its production at a time when the no more power is needed (i.e. instantaneous penetration is 100%), and its output will be low at times when other wind farms also have low output.  The same effect will inhibit solar development: excess power at noon (and low prices), insufficient power at night.

At that point, the economics will strongly favor continued dependence on fossil fuel.  Fossil fuel plants will make energy when it is most needed, and sell power when prices are highest.  Of course selling excess energy to neighboring grids and destroying the environment by burning enormous amounts of biomass can help delay the “day of reconning”; but that day will eventually come.

The proposed solution to fossil fuel lock-in, massive deployment of grid scale batteries, will be extremely expensive (US $6/W for 15 hours of lead-acid with 50% depth of discharge, just for the minimal needs of desert solar), and the battery production and recycling/disposal industry could become an environmental nightmare.

Clayton Handleman's picture
Clayton Handleman on Mar 7, 2014 3:05 pm GMT

It depends upon what their goals are.  If they are committed to low carbon footprint and it is a national priority and it contributes to quality of life, then it would seem to be working quite well for all concerned.  Denmark gets to be greener as does Norway, Norway saves a little money and Denmark does as well.  If they have committed to high density of wind then to be able to sell the power at a low rate is better than to not sell it at all.  Denmark seems to have happier people than we do so maybe we have something to learn from them – http://www.forbes.com/pictures/mef45mfgd/1-norway-2/

I think that the Europeans have figured out that there are a number of things that are not monetized in the highly inperfect energy system.  But they recognize that quality of life suffers if they do not address those things.  So they have made choices and seem to be happy having made those choices. 

 

Kevon Martis's picture
Kevon Martis on Mar 7, 2014 3:57 pm GMT

Over a 60 year timeframe wind is an across the board loser in the $/unit of emissions avoided compared to adding wind in most RTOs. 

Math Geurts's picture
Math Geurts on Oct 13, 2014 3:53 pm GMT
Bas Gresnigt's picture
Bas Gresnigt on Oct 13, 2014 6:39 pm GMT

Nathan,

So you assume to know better than the German scientific institutes, such as Fraunhofer and Agora, with their hundreds of scientists and numerous scenario and simulation studies.

Those showed that grid extension (more interconnection capacity, etc) is a cheaper and more resilient solution than storage. If the wind doesn’t blow at the north sea, than it blows in the north of Spain, etc.

Storage only becomes viable with a share of renewable of >50% or more. So the 35 pumped storage facilities in Germany will continue to make losses until at least 2025 – 2030 (1 is already mothballed).

By then battery storage may be so cheap that those pumped storage facilities cannot compete either…
The Energiewende stimulates battery storage price decreases with its subsidy program. German scientists expect that such battery storage will become cheap enough before 2020 to make it economical for households to install without any subsidy.

Bas Gresnigt's picture
Bas Gresnigt on Oct 13, 2014 11:14 pm GMT

Nathan,

So you assume to know better than the German scientific institutes, such as Fraunhofer and Agora, with their hundreds of scientists and numerous scenario and simulation studies.

Those showed that grid extension (more interconnection capacity, etc) is a cheaper solution than storage. If the wind doesn’t blow at the north sea, than it blows in Spain, etc.

Storage only becomes viable with a renewable share of >50%. So the 35 pumped storage facilities in Germany will continue to make losses until at least 2025 – 2030 (1 is already mothballed). By then battery storage may be so cheap that those pumped storage facilities cannot compete either…

The Energiewende has a subsidy program to stimulate battery storage price decreases. German scientists expect that such battery storage will become cheap enough before 2020 to make it economical for households to install without any subsidy.

Nathan Wilson's picture
Nathan Wilson on Oct 14, 2014 3:19 am GMT

My understanding of the issues involved with high solar and wind pentration comes from reading reports from the German scientists like this one, and this one (EWITS) for the Eastern US.  I think a more likely explaination for our disagreement is that you are misinterpretting the data, and/or reading them second-hand from a source that has misinterpretted them.

For example, I don’t dispute the claim that transmitting power production variability to adjacent areas is cheaper than using storage to smooth out the variation.  However, I believe the benefit is limited in the case where neighboring areas also have high renewable penetration, particularly in small areas (which must have high correlation) like Europe.  The Eastern US is similar in size to Europe, and the windpower smoothing available there is adequate for 30% wind penetration as reported in the EWITS, but the reports I’ve seen (such as NREL’s RE Futures) use large amounts of energy storage to achieve very high renewable penetration.  Similarly, the Germany report I linked above also uses large amount of storage.

The fact that energy storage in Germany has poor economics does not prove that it is unneeded, only that the current pricing system does not allow it to be profittable.

Please provide support for your prediction that batteries will be cheaper than pumped hydro. The economics of household batteries depend entirely on the pricing structure of German retail electricity, so it is irrelevant to the rest of the world.   Please confine the discussion to utility scale storage, since that is the only way to get an apples-to-apples comparison.

Clayton Handleman's picture
Clayton Handleman on Oct 14, 2014 4:22 am GMT

Nathan,

The EWITS study does not claim to set an upper bound of 30%.  In fact in the preface they point out that the goal post continues to move.  Not so long ago, they say that 5% wind penetration was thought to be ambitious.  They limit their study to an upper bound of 30% penetration but do not suggest that that represents an upper limit. 

The studies froze their technology at 2009.  That was prior to the new wind resource maps showing substantial regions of 50% CF wind.  In 2009 Li-ion batteries were at about $1000 / kwhr and nobody with the exception of Elon Musk, was imagining the day that EV volumes would be sufficient to drive battery prices down.  EWITS and the other NREL studies did not include any assumptions about EVs.  They did not include the load shifting potential and they did not include V2G.  Since then we have seen the emergence of EV credibility due to the Model S and the Leaf.  We also see ground broken on the giga factory.  EVs are ramping the world down the Li-ion experience curve at an ever more rapid pace. 

Volume production of Li-Ion batteries is driving down the prices rapidly.  Every time a skeptic talks about the long wait or possibly the never ending wait, the timeline gets advanced.  Now Elon Musk is suggesting $100 / kwhr in a decade sooner than even I had predicted based upon publicly available experience curve data.

Looking at the great match between EVs (as dispatchable load), wind and solar it is evident that far less storage is needed than many of the pessimistic predictions.  Wind and solar complement each other well.  It is only during the brief time between sundown and wind picking up that the filler is needed and EVs could easily provide that at premium pricing.  However since it would only be for a brief period during the day, price signals could be sent out to pay a premium, making it worthwhile to feed power from batteries to the grid.

Clayton Handleman's picture
Clayton Handleman on Oct 14, 2014 4:32 am GMT

While you and I may disagree on the feasability of EV batteries for grid support, I think we agree that they offer a great tool for load shifting.  As battery price drops accelerate, it is looking like rapid growth over the next 5 years.  Certainly over 10 years, EV night charging will shift load to that of maximum wind production. 

Solar does a nice job of making up the wind deficit in the afternoon.  Shifting load to night allows for higher wind penetration.  If our centrally planned utilities will deign to  send out price signals then it will become relatively simple to have much of the charging done on an arbitrage basis.  For example, an alogrythm along the lines of the following might be interesting.

Starting at midnight, charge to 60%.  Then if electricity price dips due to higher wind production, charge the car the rest of the way.

Bas Gresnigt's picture
Bas Gresnigt on Oct 14, 2014 4:27 pm GMT

“… I believe the benefit is limited in … small areas (which must have high correlation) like Europe.

 

I stated connection between the North-Sea area and North of Spain becuase the wind speed of those areas correlate negative; usually:
When there is a depression (=big winds) near Spain, there is high-pressure (=little winds) at the North-Sea area. Same the other way around.
So the correlation in wind speeds between those area’s is negative (about -0.2).

The issues are:
– is Spain political stable enough for Germany to invest in such a connection (2 DC high voltage sea cables to the north of Spain)? May be not taken into account their experience with Russia (North Stream, etc).
That issue also killed Desertec (=solar panels in the Sahara).

– how long will it stay economical taking into account:
  * the whole sale price decreases and low fluctuations as indicated by the futures at the Leipzig power exchange market;
  * the fast price decreases for battery storage, which may undermine the business totally after 2030…

“Please provide support for your prediction that batteries will be cheaper than pumped hydro.”
The simple facts that:

– the Germans stopped all pumped storage building, even left a facility that was already halfway, when those battery price decrease predictions were published;
– the Energiewende started a subsidy program in order to speed up the price decreases of battery storage (explicitly comparing this with the PV-solar program stated in 2001);

shows that the German scientists and authorities are convinced.
If you are not, you can easily google those predictions.

Bas Gresnigt's picture
Bas Gresnigt on Oct 14, 2014 9:08 am GMT

“…Germany’s energy plan … should be reversed or changed?”
“… government data are saying it, which … has drawn the attention of top policymakers.”

That attention resulted in the decision by top-government (Merkel) last autumn, to increase the speed of the Energiewende: 2030 target was 50% renewable, now it is 55%-60% renewable.
Seems to me contrary to your assumption.

Stronger, Merkel also said that at about the same time that the costs of the Energiewende will go down after ~2022, which statement is supported by the German experts (Agora, Fraunhofer)…

Math Geurts's picture
Math Geurts on Oct 14, 2014 3:47 pm GMT

There are around 1.5 million PV plants in Germany.  If this would be 5 kW plants this would be 7.5GW.

Actually there is 37GW installed, so most German PV power is not produced by “small” rooftops.  

Bas Gresnigt's picture
Bas Gresnigt on Oct 15, 2014 10:01 am GMT

@Willem,
Looking at just one of your assumptions:
“balancing and backup build-outs, because Germany cannot continue to use neighbors’ grids for that purpose.”
The Netherlands is implementing two additional high capacity interconnections with Germany, as we like the cheap German electricity (and selling ours when German prices are high).

German interconnection capacities towards other countries, such as the nordic, is also in the process to be increased, etc.
So the opposite of what you assume is happening.

Nathan Wilson's picture
Nathan Wilson on Oct 16, 2014 5:19 am GMT

Germans stopped all pumped storage building

Another possible explaination would be that German utilities are gambling that they won’t need to do a coal phase-out after all.  With the new fast-ramping coal plants, the current a near-term renewable deployments are not a threat to the coal industry.  Storage is only important in the case of low fossil fuel use.

Nathan Wilson's picture
Nathan Wilson on Oct 16, 2014 5:32 am GMT

 This study looked at solar and wind at high penetration in Germany, and they compliment each other a little, but they still found a need for a lot of storage for Germany to reach 60% combined solar and wind penetration.  Sure the US central plains wind has a much higher quality resource, but thus far, the notion of importing renewable energy from other regions has not overcome the “buy local” mood, and long distance transmission is not free.

I think EVs will do a lot of nighttime charging (hence increasing baseload demand), but vehicle-to-grid power transfers I’m skeptical about.  If would take very high power prices to make this happen, and that is bad news for most people.

As for EWITs, even at 30% wind penetration, they predicted substantial power cost increases.  Sure higher penetration is technically possible, but it may not be economically possible.

Bas Gresnigt's picture
Bas Gresnigt on Oct 16, 2014 10:41 pm GMT

“Cyclic loading of wind turbine”
The crashes due to metal fatigue of the first jet airliners (the Vickers Viscount) are more than half a century ago. Nowadays it is well known how to avoid that (computer simulations available. etc).

“life-time”
Quite a number of the first significant Danish wind turbines (~1980) are still operating fine. Most are replaced by bigger ones for economic reasons (more from the same site).
With direct drive wind turbines, the wearing gearbox is removed. So now only a few bearings left which can easily made such that they run a billion rotations =>100years.
Btw. planes nowadays fly up to 60years.

“The Enercon”
The wind turbine is produced in Germany and transported to the NW of the Netherlands. Assume that US roads have similar capability as Dutch roads.

“Moore’s law”
Agree. The reference to PV-panels, concerns the costs decrease as that shows similar characteristics.
Part of that is caused by technical improvements (thinner, more accurate layers, higher yields, larger wafers), part by production automation.

“high efficiency … cells”
Agree that those use other materials as well, and that production will be more complicated.
Research in that area shows good progress (new materials in addition to GaAs, etc). Production machines will highly profit from the development of chip production machines that can produce details <10nanometer. Higher yields, more automated machines => cheaper.

no way … Germans can compete alongside Chinese vendors”
Philips moved the production of its shavers (Philishave) back to the Netherlands as it is cheaper in the more automated factory here (and better quality as machines make little mistakes).

So, together with the Germans, I estimate that:
– continued price decreases during next decade; and
– unsubsidized price levels <€25/MWh for solar and <€35/MWh for wind
are to be expected.

Clayton Handleman's picture
Clayton Handleman on Oct 19, 2014 5:18 pm GMT

 

Hmmm, not sure what the mystery is here.  They have committed to wind power.  That leaves them with two choices:

1) Build excess wind to cover the higher demand, less windy daytime and throw away power at night. 

Or,

2) Sell at low price during the night and buy at higher price during the day. 

As long as approach 2 is more economical than approach 1 it is a win for both parties.  It is a win-win.

Many people think that if one party benefits more than the other then the one that benefits less is a loser.  That is a flawed approach as long as the party that benefits less is still benefitting more than their alternative scenarios.

In the US we have a contingent that looks at the current rigged system and builds their models and beliefs based upon it, erecting a fictitious architecture of flawed logic calling it capitalism or market driven.  Our current utility system is a centrally planned Soviet style system.  Just as opening up the phone system did not cause its collapse, so we will see many utility reforms that will bring market forces to bear on our power system.  The most glaring is our failure to use TOU metering.  That subsidizes folks who waste power during peak and fails to reward those who load shift.

Many feel that if a consumer is exposed to price spikes, the market has failed.  However, the reality is that they already are exposed to price spikes and it gets averaged by the utility and they pay an aggregate average and have no choice in the matter.  In a market based system, the consumer will get the feedback that there is a power spike and prices have surged.  Then they can choose how they use their electricity.  This will quickly incentivize many creative load shifting approaches, many that nobody has even thought about.  And with the emergence of EVs which are very flexible as to when they charge there is potential for enormous load shifting.  A typical driver may charge his battery half way and then set an arbitrage algorythm to buy only if prices go below a setpoint.  All that is needed is that time of use real time pricing.

Folks that oppose wind at all costs, and beyond any rational consideration will spend great intellectual effort trying to suggest that EVs aren’t going to happen and Li-ion batteries are too expensive and therefore this load shifting is a myth and wind is an automatic vote for natural gas.  Some are schills for the FF industry, but I think some are simply so stuck in a backwards looking mindset that they cannot accept a changed and superior paradigm.  They generate healthy dialog by forcing folks with another perspective to do their homework and clarify their ideas.  It is a fine thing.

And yes, given the choices Denmark has made about how they will power their country, working collaboratively with Norway is a lower cost approach than the alternative within the paradigm they have committed to.  And I refer you back to my earlier post to the link that shows the overall love of life is much higher there than in the US.  Correlation is not always linked to causation but it provides a good staarting point to evaluate cause and effect.

 

Jeffrey Miller's picture
Jeffrey Miller on Oct 19, 2014 10:47 pm GMT

Clayton,

I completely agree about the desirability of TOU metering for the reasons you outline. Electricty generation and consumption are highly heterogeneous and pricing should relect this. On the other side of the coin, and for exactly the same reasons, net metering for residential solar should be replaced by TOU retail rates for consumption and a ‘time of generation’ wholesale sale price for generation. 

Bas Gresnigt's picture
Bas Gresnigt on Oct 19, 2014 11:08 pm GMT

With the continued penetration of renewable (>55% in 2030, share growing further at ~1.5%/a) the prospects for all fossil fuel power plants are rather bad.
Even for the new highly flexible lignite plants that have a much lower cost price than the fully depreciated nuclear base load plants.

However a number of those new plants may switch to burning mixtures of waste/biomass/lignite/coal and may then survive until some time after 2050 (their circulating fluidized bed process facilitates those mixtures)..

Clayton Handleman's picture
Clayton Handleman on Oct 20, 2014 1:40 am GMT

Comment looped to top of page, thread is getting too skinny.

Clayton Handleman's picture
Clayton Handleman on Oct 20, 2014 1:49 am GMT

“net metering for residential solar should be replaced by TOU retail rates for consumption and a ‘time of generation’ wholesale sale price for generation.”

Jeffrey,

Net metering is a complex topic.  I probably agree with you though it is a bit unclear to me what you are proposing.

One area that I am very clear on, is that any power that is generated on premisis and used on premisis should not be part of the equation.  It should just be treated like demand reduction.  There should not be any transaction charges associated which in effect means that the person generating and using on premisis can value that power at TOU rates even though it should never show up on the bill. 

As far as excess production there are good arguments both ways.  More than I want to delve into tonight.  TEC is due for a net metering post in the near future.  Hope someone will revisit it and post.  Not something I have time to do unfortunately.

 

Jeffrey Miller's picture
Jeffrey Miller on Oct 20, 2014 2:40 pm GMT

“One area that I am very clear on, is that any power that is generated on premisis and used on premisis should not be part of the equation.”

I agree. If someone generates power that they use and which never goes onto the grid, it’s not anyone else’s business and they shouldn’t have to pay anyone anything to be able to do so. This is as you say pure demand reduction and should be encouraged.

My objection to net metering is in allowing customers to take their excess energy – energy they generate and don’t use – and sell it to the grid at retail rates. That is crazy on many levels and provides many bad economic incentives.

Math Geurts's picture
Math Geurts on Oct 20, 2014 3:25 pm GMT

That is right see:

The integration of wind and solar generators into power systems causes “integration costs” – for grids, balancing services, more flexible operation of thermal plants, and reduced utilization of the capital stock embodied in infrastructure, among other things.

Hirth, Lion, Falko Ueckerdt, and Ottmar Edenhofer. “Integration costs revisited–An economic framework for wind and solar variability.” Renewable Energy 74 (2015): 925-939.


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