DIW Study: Higher Energy Production Flexibility Reduces Surpluses

A recent study by Wolf-Peter Schill from the German Institute for Economic Research (DIW) analyses the connection between more flexible electricity generation and surpluses on the electricity market. Surpluses can lead to negative prices on the electricity market as long as the electricity cannot be stored. The study looks into how a more flexible fleet of conventional plants could substantially reduce surpluses on the market. Additionally, the study calls for research and developments into storage facilities to absorb overproduction and to cover peak load periods.  

One of the main challenges of the German energy transition is the highly volatile availability of energy from renewable sources.Wind and photovoltaic energy depend highly on the weather and are difficult to adjust to the market demand. As a consequence electricity generation might be higher than demand.

For technical and economic reasons, conventional plants like nuclear and coal plants currently generate electricity at a must-run of about 20 GW, the study says. Existing biomass energy plants are also difficult to adjust quickly. Biomass plants could be technically improved while the fleet of conventional plants could be made more flexible by substituting coal by more flexible gas plants.

The study compares hypothetical situations in 2022, 2032 and 2050. The amount of renewable energy varies among the scenarios (the basic scenario contemplates a realization of the Federal government’s goals on the share of the renewables, the others regard possibly higher renewable production).

In principle, the share of renewables in the energy production rises, leading to a future reduction of the base-load (the amount of electricity that must still be generated conventionally). The reduction is not uniform, and particularly high during off-peak periods. The electricity supply from renewables is then sometimes higher than the demand.

In a flexible system (i.e. without a base-load from conventional and more flexible biomass plants), surpluses occur 471 hours of 8,760 hours a year. The surplus generated during these hours would however only be 4.4 TWh, which corresponds to less than 2% of the overall yearly production. In contrast, in an inflexible system, the surplus energy would rise to 18% of the energy production.

Another question addressed by the study is the storage of energy from renewables. In principle, a flexible system requires fewer new storage facilities than an inflexible system (41 GW as opposed to 74 GW additional capacity for 2032). These numbers are however based on the assumption that all electricity from the market is fed into the system.

Should the feed-in from renewables be reduced by only one per cent of the yearly production, an inflexible system would require only half as much new storage capacity (38 GW), while a flexible system would not need more storage at all. But there might be political objections to reducing the feed-in for renewable energies.

A more flexible conventional system is therefore vital to avoid energy surpluses and should be taken up as top priority. Besides technical improvements and a substitution of inflexible coal by more flexible gas plants, exporting surpluses or their use for heat generation could increase system flexibility.

Research and investments into new storage systems are likewise considered important, but it should be noted that a slight reduction of feed-in during peak times can considerably reduce the amount of storage needed. The importance of storage is, however, not limited to the balance of surpluses but also to cover peak loads and supply frequency control.

Source: DIW Berlin

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