Originally posted here and co-authored by Fabian Huneke.
An early phase-out of coal, 80 percent renewable energies by 2030 and climate neutrality by 2045 : these are the three energy-related cornerstones of the federal government’s ambitious plans in the coalition agreement. Implementing the content of two legislative packages is on the agenda for this year.
The planned changes will potentially have a very strong impact on the electricity market. The wholesale electricity price is falling, phases of full supply from renewable energies are increasing , and at the same time the demand for gas-fired power plants, hydrogen and electricity is increasing. The Energy Brainpool analysis team first assesses the potential economic impact of the coalition agreement in the form of a scenario sensitivity. In this blog post we present some results.
Phasing out coal once, ideally by 2030
Coal-fired power plants currently offer an output of 34.4 gigawatts (GW) on the electricity market [1]. If these are to be phased out by 2030, part of their controllable output will have to be replaced. By 2024, another 2.9 GW are expected to be added to the current gas-fired power plant capacity of 28.6 GW. Here we only consider the power plants that will offer their output on the electricity market.
Newly built gas power plants take around two years to plan and two years to build. Subject to approval, the additional extension is technically feasible, if it is economical.
It is not necessary to replace all decommissioned coal and nuclear power plant capacity 1:1 for three reasons. Firstly , there will be an increased exchange of electricity in Europe, secondly , there is now little excess European power plant capacity that still exists, and thirdly , the demand for electricity will become more flexible.
Results of the modelling
If we take these factors into account, Energy Brainpool's hourly European electricity market model for 2030 results in a gross power requirement of 45.9 GW from gas-fired power plants (+14.4 GW). In particular, the exact numerical value depends on
- controllable power plant capacities of neighboring countries,
- the degree of flexibility in electricity demand,
- the storage capacities,
- and the availability of European cross-border interconnector capacities.
It is currently still unclear whether and how this technically necessary expansion can be stimulated by energy policy .
A geopolitical impact is particularly explosive against the background of the current energy price crisis. In our scenario, electricity generation from natural gas power plants increases by 51 percent from 2020 to 2030. The dependency of electricity generation on natural gas imports is therefore increasing significantly. However, this figure is put into perspective when you consider that electricity generation accounted for only 14 percent of German gas demand in 2020 [2].
200 (!) GW of photovoltaics
Admittedly - when we at Energy Brainpool saw this goal for the first time in November 2021, we were surprised at the level and ambition. Our hour-by-hour modeling shows that the target share of solar power will increasingly challenge the power system. The amounts of PV electricity that would have to be marketed at negative electricity prices in the midday hours increase to up to 13 percent of the total generation in our calculation. If we assume in the modeling that the charging of the 15 million e-cars in 2030 will not be controlled, this value increases drastically again.
Herein lies a huge, currently unsolved challenge. Because Germany can only achieve an 80 percent share of renewable energies if these generation volumes are integrated. Alternatively, a good one percentage point of additional PV power must be installed for every percentage point of electricity that is curtailed at noon.
The average sales revenue from solar power in 2030 is already 8.4 percent below that from onshore wind power. Today, mind you, this is the other way around: throughout the year, electricity from solar systems has a higher market value than electricity from wind turbines. This is mainly due to the fact that the power consumption is higher in daylight. However, this advantage is put into perspective by the greater increase in planned solar expansion compared to wind power.
Over the year, the share of photovoltaic electricity in our scenario calculation in 2030 is around 26 percent. Since the winter in Germany is not known to be sunny, the average feed-in from June to August is around four times the amount generated from December to February.
Insight into the modeling
The figure below shows the power system on four days in late summer 2030 according to the hourly power market modelling. When there is a lot of sun and wind, the inflexible electricity demand is supplemented by a flexible load (e-cars, heat pumps, electrolysers) and surpluses are exported. If there is a shortage of sun and wind, additional gas-fired power plants kick in and imports cover part of the load. There are also days with overfeeding from renewable energies.
In our modeled world, despite negative electricity prices, flexible electricity demand, electricity storage and exports, there are no longer any consumers for individual generation load peaks in some situations.
Figure 1: Hourly generation and demand structure in the modeled electricity system on four days in late summer 2030 (Source: Energy Brainpool)
It's getting cozy on the North Sea
There are a few more milestones in the coalition agreement for offshore wind power: "We will significantly increase the capacities for offshore wind power to at least 30 GW in 2030, 40 GW in 2035 and 70 GW in 2045." [3]. Since offshore wind power is the utilization king among the fluctuating renewable energies, this is a real booster for renewable electricity generation for the period after 2030.
The realization of an installed wind power of more than 40 GW, especially on the North Sea, goes hand in hand with exceeding a critical power density, i.e. the amount of installed power of wind turbines per area. This can cause a noticeable mutual shading of the systems. So far, we have assumed that the average hours of full use will decrease by 23 percent between 2035 and 2045, but we see a need for further research on this.
Economically, wind turbines get off lightly compared to solar systems. The capture rate of onshore wind energy “only” falls to just under 80 percent in the scenario year 2030, and to only 87 percent for offshore wind energy. This value indicates the ratio of the market value of the weather-dependent generation profile of wind or solar systems compared to the market value of a base load supply. In the case of solar systems, on the other hand, this value falls much more drastically to 71 percent.
We make it (?)
In many conversations, customers have asked us "whether that's still realistic at all?". Subject to the requirement of achieving 80 percent electricity from renewable energies in 2030 with simultaneous sector coupling, this is at least the most realistic battle plan from our point of view.
First of all, an EEG payment increase or solar obligation increases the construction of PV rooftop systems. This is followed by larger free-field PV systems with a slightly longer planning time in a mix of tenders and large PPA-financed projects. When it comes to onshore wind power, the plan stands and falls with the availability of space. From our point of view, an EEG adjustment and regulatory change needs at least four years in advance before the annual gross increase swings onto the home stretch. In addition, the adjustment faces the increased risk of whether and for how long old systems can continue to be operated. We do not expect additional expansion of offshore wind energy until the end of the decade. An entire industry needs to be revitalized here, and both network planning and expansion will still take a lot of time.
Summary
All in all, we rate the coalition agreement as a very ambitious but possible plan. The good news for electricity consumers: If the plan works, the wholesale electricity price will fall significantly despite the coal phase-out. Very low electricity purchase prices could be realized in the future, especially with time-variable tariffs for flexible consumers and for electricity consumption in summer.
Reading tip: You can find our general analysis of the results and potential points of conflict in the energy and climate policy agenda of the future German government here .
[1] Federal Network Agency power plant list (nationwide; all network and substation levels) as of November 15, 2021
[2] BDEW: Development of natural gas sales in Germany, as of December 13, 2021
[3] Coalition agreement between SPD, Bündnis 90/Die Grünen and FDP 2021, p. 57