Parts 1 and 2...
Part 3 - Market design
of course investors need confidence in the market before they will proceed with anything seriously. “Here there is a debate on the new market design,” Professor Dr. Claudia Kemfert, Head of the Department of Energy, Transportation and Environment at the German Institute for Economic Research (DIW Berlin) says. Germany is looking at the potential for a capacity-based market like the UK is introducing for large-scale renewables.
“There are studies already out showing that this may not be the best solution [for Germany] because we have we have a very large share of existing power plants. If we have a capacity market only for new power plants then the old ones may be shut off, so there might be higher costs,” she continues.
On the other hand, a capacity market, or one that may look like a capacity market – like an auction system where you have 5-7 year contracts for auction – could provide a “better mix of supply and demand”, she says.
But for the immediate future, Germany should continue with the FIT system in order to guarantee supply and investment security, she says emphatically. “You cannot change the system now.”
Of course, retaining a FIT is one thing. Setting it at a level that still safeguards an industry while not being overly generous is another. Germany's solar industry has become a world leader thanks to the government's generous FITs of the past, driving domestic installations to around 28GW. Facing stiff competition from the Chinese and a global market where supply of cheap solar PV modules massively outweighs demand, the country's domestic manufacturers also face sharp cuts to FITs at home.
In late June, to safeguard jobs, a compromise was reached. It still means significant cuts of 20-30% in tariffs, with projects limited to 10MW in size (as they are now), while a new class size of 10-40kW for roof-top installations has been introduced.
For now, FIT support has been capped. Once the country achieves a cumulative capacity count of 52GW, the money stops. While some in the sector have called the compromise half-hearted it still realistically allows for annual capacity additions of 2.5-3GW over the next 8-10 years.
Wildpoldsried – a vision of the future
So the challenge ahead for Germany is mammoth. Making the country's new energy policy work “will require a broad range of measures that will have to fit together perfectly like the parts of a puzzle,” as Siemens, puts it. Fifteen years ago, only a few hundred energy producers were feeding power into the German grid. “In the future, there'll be millions,” says the German power force.
So how can this really all come together? Well in southern Bavaria, the Allgäu village of Wildpoldsried is showing the way. It has become Germany's landmark example of how 100% renewables could be achieved with some smart thinking.
Siemens says smart grids will be “indispensable” for the future. “The share of renewables-based power generation in Germany is rising relentlessly. Smart grids – intelligent power distribution systems – have a vital role to play in ensuring that this often highly fluctuating “green” electricity supply can be integrated into the grid in an expedient and energy-efficient manner.”
And in Wildpoldsried, the Integration of Renewable Energy and Electromobility (IRENE) Project offers a foretaste of what Germany's smart power systems could look like in the 2020s. The energy pioneers of Wildpoldsried are already producing 321% more electricity than they need, with the excess being exported to the grid and generating the tidy sum of €4mn in annual revenue for the village. The money is pumped into further green initiatives – in June, for example, construction work for the installation of two new 2.3MW Enercon direct drive wind turbines was underway.
Since Wildpoldsried started on its renewables road in 1997, the town's carbon fottprint has dropped a 65%. Led by mayor Arno Zengerle, it started with wind turbines and biomass digesters for cogeneration of heat and power.
Today 190 private households are equipped with solar panels, there are four biogas digesters (a fifth is under construction), seven wind turbines (soon to become nine), three small hydro plants, and a district heating network with 42 connections. Significantly, none of these have been funded by “big” investors from outside, says the mayor. They are all community owned, with local people funding them. The wind projects have given the local investors a minimum rate of return of 8-10%, he notes.
Meantime, electric cars are already “normal” for the villagers, and a smart grid in the village maintains the balance between energy production and consumption and keeps the power grid stable. The locals are rightly proud of their achievements to date but bold plans for the future are never far away.
Supported by the German Federal Ministry of Economics and Technology, the two-year IRENE smart grid project is led by Siemens and local utility, Allgäuer Überlandwerk GmbH (AÜW). RWTH Aachen and the University of Applied Sciences in Kempten are also involved. Siemen's self-organising energy automation system is at the heart of the Wildpoldsried smart grid project. The aim is to “ensure that the many photovoltaic (PV) plants, wind turbines and biogas installations, which AÜW has in the meantime connected to the distribution system, can be operated as a smart grid,” explains the firm.
That includes the construction of a charging infrastructure for electric vehicles, which not only use the electricity generated by the village's renewable power plants, but also have the potential to act as electricity storage units. “Once connected up to a smart grid they will store any surplus electricity available ready to feed it back into the grid during times of peak demand,” says Siemens.
The concept planned for Wildpoldsried promises to benefit everyone involved, says Richard Hausmann, head of the Siemens corporate project Smart Grid Application. “Consumers will be able to reduce their bills by changing their behavior, generators will be able to market their electricity efficiently and thanks to improved management of the power generation/consumption balance, grid operators will only need to hold a limited amount of capacity in reserve to cope with peaks in demand and supply.”
Note: in our September/October magazine, we will look in detail at energy storage, e-mobility, and smart grid development in Germany, as well as at regional project, technology and company activity. Sign up here!
About: Gail Rajgor is Managing Editor of Renewable Energy Focus.