Germany’s Business Opportunities in the Power Sector

Germany’s energy system is undergoing major change and with that, brings opportunities.
Published: Mon 16 Jun 2014

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There has been an “unbundling” of formerly market-dominant companies since the German electricity market was liberalized in 1998 and the share of renewable energy in electricity generation has increased substantially since then too. This is according to a report compiled by the Germany Trade and Invest which is a foreign trade and inward investment promotion agency of Germany.

The report, The German Energy Market-Business opportunities in Germany, gives a brief description of the European country’s current market potential and where it is heading.

Renewable energy, including wind, solar photovoltaic and biomass energy, is considered to be the real game changer. The increasing amount of renewable energy on sale lowers the average price per unit of electricity. However, industry electricity prices have been rising due to taxes and duties while the cost of generation, transport, and distribution has been decreasing. The German government has made the hardship provision available to help companies cope with high energy costs.

The rising electricity price for private households is also a growing concern. German industry electricity prices are above the average price in Europe.

Germany’s consumption and goals

The country’s government has established a number of goals to be reached by 2050:

  • An 80% reduction in carbon emissions

  • A 60% total energy consumption of renewables

  • A reduction of energy consumption by 50% and electric consumption by 25%

The renewables contribution is in response to Germany’s nuclear power phase-out which has created a great need for power.

Germany’s liberalized market

More than 1000 market participants are active in the fully liberalized German electricity market. With over 25 million off-take points at the low voltage level and 800,000 off-take points at the medium voltage level the listed 19 companies represent over half of the total 44.8 mill off-take points in Germany. The remainder belongs to approximately 800 other grid operators.

The new power structure in 2022 will lead to bottlenecks in Germany. As a result, power balance will change significantly between now and 2022.

Grid connection levels of renewable energy systems are rising. In addition, an enormous expansion of the high voltage grid system is required by 2023. The system needs a 5450 km expansion. The baseline scenario with overhead lines requires €20 billion. The connection of the offshore grid is going to cost €10-12 billion.

The report points out that the grid extension must be seen from a European perspective-approximately 50,000 km of transmission lines are required to mitigate larger, volatile long distance power flows through the European Union by 2022. On the European Union level, some 100 transmission projects from 100MW to 4GW need to address grid bottlenecks until 2022. This is going to cost €104 billion until 2022, including €23 billion for subsea cables.

Projects of common interest are key energy infrastructure projects designed to accelerate the implementation of the energy infrastructure necessary for the EU internal market. The report points out that 132 projects of common interest were selected in 2013-worth some €50 billion. This is as a result of faster and more efficient permit-granting procedures and improved regulatory treatment.

Distribution grid needs attention

There is a massive need to expand the distribution grid. The grid requires:

  • Expansions of 135,000km up to 193,000km

  • Conversions of 21,000 to 25,000km

  • The investment needs for grid extension and conversion until 2020 is €18- €16 billion, and by 2030, €27-42billion.

According to the report, investment needs can be reduced significantly by various technical options:

  • Innovative operational resources

  • Down-regulation of power peaks of renewable generation

  • Storage systems

The issue of energy storage

Eighty percent of electricity, generated from renewable energy sources, is distributed by 20 distributed systems operators.

To date, electricity cannot be stored in large quantities. It is therefore produced and consumed simultaneously.

According to the report, market entry for smaller players in the field of control reserve is easy. Today, for energy storage and control reserve, only hydro pump and gas power plants are seen in the Balancing Energy Market in Germany.

Since there will be a significant growth in the amount of surplus energy by 2030, the legislative framework has been changed to open the market for innovative storage technologies. Germany is one of the largest markets for primary control in Europe.

Currently, control power provision is carried out mainly by conventional power plants. The market size is most reliant on the regulatory framework. Alternative technologies such as demand side management, control power provision by renewable energies, other storage technologies (power to gas), are gaining momentum.

There are 2 projected Lithium-Ion systems (5MW and 10MW)- the scheduled commissioning is set for the end of 2014.

The Younicos battery, based on Lithium-Ion technology has been bought and operated by medium-size German municipal utility WEMAG The fully automated turnkey battery park is ready for the primary frequency response market. Operations will begin in June 2014.

The gas grid will also be used for energy storage. Over 12 projects, using hydrogen as mass storage for the industry is being adopted. Hydrogen is used directly or fed into the gas grid

Hybrid power plant gives a continuous energy supply-Enertag Hybrid power plant –sustainable and clean electricity and heat.

EON’s Power to Gas pilot, Falkenhagen, has the following goals:

  • The storage of renewable power

  • Tech-analysis of Proton-Exchange-Membrane (PEM)

  • Hydrogen injection into local grid

These Power to Gas plants have a number of features:

  • Eco-friendly-water as operating medium

  • Balances changing load situations

  • Half-scale with twice alkaline’s capacity and first large demonstration plant in the distribution pipeline

The report points out that the gas Distribution Grid will work since the grid infrastructure is already in place, local gas grids cover storage requirements, and efficiency levels are increasing (via waste heat recovery from the process of electrolysis.)

Energiewende Status Quo and Opportunities

The report discusses the next phase, that is from generation to the integration of renewable energy:

  • With regards to distribution and stability, a grid upgrade is necessary, as well as a smart metering roll-outs, and balancing power business models.

  • Perspectives for energy storage-Small systems are needed for domestic photovoltaic commercial, and grid level storage in pilots and research is required.

  • Increasing energy efficiency in buildings to which will see a major reduction is costs.

The report concludes that the energy system should aim to be reliable, sustainable and affordable for all consumers.

Further reading:

Germany Trade and Invest-The German Energy Market-Business Opportunities in Germany (Heiko Staubitz)