A Sign of Things to Come in the Energy Market

[My friend Ian Page, who researches and writes extensively about energy has graciously allowed me to repost some of his emails here.]

by Ian Page, 2024.08.07

German Utilities Paid to Stabilize Grid Due to Increased Wind and Solar

Its well understood that as the proportion of renewables increase, both stabilisation and storage become more critical.

As Germany is furthest ahead in the proportion of renewables, its interesting to watch the H1 and H2 responses.

The German grid has created a standardized bidding market in 5 minute chunks, and the price that is achieved for switching power on or off at very short notice is high enough to create innovation.

The fossil utilities are losing money and asset value: “German wholesale next-year electricity prices have plunged 60 percent since 2008 as green power, which has priority access to the grid, cut into the running hours of gas, coal and nuclear plants”

Adaptable producers can make huge profits: Leading to H2 innovation. “In Germany’s daily and weekly balancing market auctions, winning bidders have been paid as much as 13,922 euros to set aside one megawatt depending on the time of day, grid data show. Participants stand ready to provide power or cut output in notice periods of 15 minutes, 5 minutes or 30 seconds, earning fees whether their services are needed or not.

There’s plenty of innovators out there “New participants are flooding into the market now, which means that prices are coming under pressure,” Pilgram said. “Whoever comes first, gets a slice of the cake, the others don’t because prices have slumped.”

With some really bad H2- ideas

“Jochen Schwill and Hendrik Saemisch, both 33, set up Next Kraftwerke GmbH in 2009 to sell power from emergency generators in hospitals to the power grid. Today, the former University of Cologne researchers employ about 80 people and have 1,000 megawatts from biomass plants to gas units at their disposal, or the equivalent capacity of a German nuclear plant.”

And an ambiguous H1 response:
“To adapt to volatile supply and demand, RWE invested as much as 700 million euros on technology for its lignite plants that allow the units to change output by 30 megawatts within a minute. The coal-fired generators were originally built to run 24 hours a day.

RWE’s lignite generators, which have a total capacity of 10,291 megawatts, are flexible enough to cut or increase output by 5,000 megawatts on a sunny day, when power from solar panels floods the grid or supply vanishes as skies turn cloudy, according to Ulrich Hartmann, an executive board member at RWE’s generation unit.”

But very profitable results “Hartmuth Fenn, the head of intraday, market access and dispatch at Vattenfall AB, Sweden’s biggest utility. “Today, we earn 10 percent of our plant profits in the balancing market” ”

Overall we can see that fossil plants in future may produce most of their profits as balancing plants not baseload- a nice switch. Of course this only works for stranded assets. It would be hard to make a case for building new fossils for this purpose, as the price for balancing is dropping with new innovative entrants.

Pumped storage anyone!

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