Germany Struggles With Too Much Renewable Energy

Since the 2011 Fukushima nuclear disaster, Germany has been one of the few countries that have successfully moved away from nuclear energy. Germany has so far successfully shut down its nine units that had the capacity of generating enough power for at least 20 million homes in Europe. In fact, the contribution of nuclear power in Germany’s electricity generation has now fallen to just 16 percent and renewables are now the preferred source of electricity generation in the country.

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However, Germany and its neighbors are now facing an unusual problem. With the dramatic increase in green energy usage, Germany is generating so much electricity from renewables that it is finding it hard to handle it. The excess electricity that is generated is being spilled over to its neighboring countries, thereby increasing the threat of a power blackout should there be a sudden supply disruption.

How much should Germany invest to solve this problem?

Although Germany has increased its renewable energy generation by almost five times in the last decade, it has failed to invest in building the necessary infrastructure to carry this energy. The excess electricity that is being generated by Germany is spilling over to Poland and Czech Republic, two countries that are investing close to $180 million to shore up their grids from Germany’s power spillage. “A huge accumulation of overflow increases the threat of a blackout. The root of the situation is allowing a huge amount of electricity to be generated regardless of the capacity of the grid,” said Zbynek Boldis of Czech grid CEPS AS. It is quite obvious that Germany needs to upgrade its network to accommodate the excess power. In fact, grid companies in Germany are set to invest close to $24 billion for upgrading their network and modify its existing high voltage power lines.

Is there a way that this excess power is stored?

Yes, there is an energy storage technology that has the capability of storing this excess power. The power to gas technology basically converts the excess electricity into gaseous energy by producing a zero carbon hydrogen gas. This gas can then be converted into renewable methane and used as an energy source in future. German auto giant Audi was the first to use this technology by setting up the world’s first 6 MW- ‘power to gas’ plant in its home country. In fact, Audi’s E-gas plant is now directly contributing to the stabilization of the country’s power grid. German grid operators are welcoming players that can contribute to stabilize its fluctuating energy production. According to Germany’s second biggest grid operator, Tennet TSO GmbH, an energy-balance player must be capable of drawing close to 6MW power from the grid within a period of five minutes while operating on its standard load profile. Audi’s e-gas plant has been successful in meeting this criterion and has been able to produce more e-gas at the same time by increasing its targets.

What is the price of this power?

The balancing power market has created a tremendous buzz in Germany as several new players are entering this market where utilities can end up getting paid 400 times more than the wholesale electricity rates. However, the increase in the number of new players has reduced overall prices. “More supply means lower prices and that means lower costs for German end users,” said Armasari Soetarto who is a spokeswoman of the Bonn based authority. According to data from Next Kraftwerke, the price of power capacity that is available in the span of five minutes has reduced to around $1232 per MWh from $1,877 per MWh in January 2015. However the biggest price drop is for electricity capacity with the capability of reducing output within 15 minutes. Those prices have dropped to $401 per MWh from the earlier $1,794 per MWh in January 2015.

In 2014, companies operating in the balancing power market got close to $1.1 billion through direct payments. As Germany tries to double its power output from renewables by 2034, the balancing power market is set to grow in the next few decades.

Can companies from neighboring countries gain from cheap German electricity?

Traders based in Austria have, in fact, gained at lot from cheap German electricity. These traders sell German electricity at higher prices to other countries at capacities that far exceed the planned figures. However, the German-Austrian market is now coming under scrutiny from European regulators and Austrian traders are now blocked from buying German power.

Cheap German electricity would indeed find a lot of takers, especially the companies and grid operators in neighboring countries Poland and Czech Republic. The price of German electricity is around 18 percent less than what is available in Poland, so it makes financial sense to buy cheaper electricity from Germany. “My boss keeps asking why we aren’t buying power from Germany, but this is practically impossible,” said Henryk Kalis who is an energy buyer for ZGH Boleslaw that is controlled by Arcellor Mittal. In order to change this market outlook, it is extremely important that Germany invests in its energy infrastructure and brings it in line with its renewable energy generation. It is ironic that a country which produced around 78 percent of its power consumption from renewables in July 2015 still struggles to ship its cheap power from the northern region to its southern region.

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