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Why is Germany’s grid expansion slow but still unable to meet the demand for renewable energy?
As global demand for renewable energy grows, Germany faces significant challenges in investing and expanding in this area. Although the installed wind energy capacity in northern Germany is growing rapidly, the expansion of the power grid has not kept pace, leading to increasingly serious power transmission and stability problems.
With nearly 50GW of installed wind energy capacity, more than one-third of Germany's electricity demand in 2017 came from wind energy.
Slow grid expansion and congestion challenges
Germany’s grid expansion faces serious bureaucratic challenges. Under current regulations, the process of expanding the grid requires cumbersome procedures, making it impossible to match the rapid growth of renewable energy. When wind energy production peaks, the grid's transportation capacity cannot bear it, resulting in an imbalance between power generation and the grid, which in turn causes congestion.
During periods of strong winds, certain types of wind turbines are forced to shut down, a practice known as "output management."
How a congested grid affects the use of renewable energy
In order to solve the congestion problem, one of the current options available to system operators is to temporarily shut down some wind turbines, which will incur high environmental and economic costs. When a kilowatt-hour of wind energy is shut down, another conventional power plant must come on to fill the gap, typically a natural gas combined cycle plant, further adding to the financial burden. In 2016, Germany's output management costs reached 373 million euros, and are expected to increase to 5 billion euros by 2025.
According to a study, social costs in Germany continue to rise, and these costs will ultimately be borne by consumers.
The concept of local flexibility market
To address the above issues, Germany is exploring the potential of local flexibility markets that can enable decentralized energy resources (e.g. energy storage, demand response, electric vehicles, etc.) to provide flexibility at the local level, thus easing grid congestion Phenomenon. This market model is mainly operated by independent third parties, making electricity transactions more transparent.
Local flexibility markets not only help combat congestion but also allow flexibility providers to benefit in the market.
Benefits and Challenges of Flexibility Providers
For flexibility providers, local markets offer an opportunity to benefit economically from their location. However, the current market-based options for flexibility in the European electricity market are relatively limited, which means that its profit potential in the local market has not been fully realized. Therefore, how to design an appropriate reward mechanism for flexibility providers is a major challenge currently faced.
Macroeconomic benefits
According to forecasts, Germany will need 50 billion euros in grid expansion funds by 2030, and the establishment of the local market will greatly reduce this need. This not only reduces social costs, but also maximizes social welfare through accurate prices that reflect the actual economic conditions of electricity.
Implementation barriers and discussions
Although local markets have many potential benefits, there are many obstacles in the implementation process, including regional reasons such as different renewable energy resources, load density and flexibility potential, which will affect the applicability and flexibility of local markets. Effect. In addition, the current regulatory environment and market structure still need to be improved to support the development of local flexibility markets.
The implementation of new regulations may have a profound impact on system operators and market participants, helping to promote the development of the flexibility market.
Summary
Although Germany has made remarkable achievements in the development of renewable energy, its shortcomings in power grid expansion have become an important factor restricting its overall development. The establishment of local flexibility markets is expected to be an effective way to solve this problem and fundamentally balance the contradiction between power supply and demand. However, how to carry out effective market design and operation under the current legislative policies in the future still requires further thinking and discussion?
