Renewables growth drives market debate

GERMANY: Wind played the biggest role in pushing renewables contribution beyond 20% of German power consumption in the first half of 2011. Over the past decade, renewables' share has more than trebled and is now well on the way to meeting government targets of 35% in 2020 and 50% by 2030.

Google Translate

More than a fifth of German electricity is already supplied by renewables, which is on a par with contributions from coal and nuclear, although still trailing lignite. Debate on transforming electricity market structures in line with the new types of generation is now intensifying.

German wind generation amounted to 20.7TWh in the first half of 2011, up 13% on 18.3TWh in the first half of 2010. Renewables generated 57.3TWh in the same period, 20.8% of German electricity consumption.

But the growth of wind and renewables, combined with Germany's policy to phase out the use of nuclear power by 2022 in the wake of the Fukushima nuclear disaster in Japan, has galvanised discussions on the future shape of the electricity market in Germany and, inevitably, the interlinked European market.

German law requires that most renewables generation is marketed on the day-ahead (spot) electricity market by the country's four transmission system operators. Electricity traders are so far coping with the variable wind and solar output. Stefan Judisch, head of RWE Supply and Trading, told an energy conference in Cologne last month that energy is becoming a weather-derivatives market, with electricity and gas dependent on wind and solar.

Higher consumer levy

But the system has fundamental contradictions that have to be tackled. The larger the volumes of renewables electricity in the market, the more the spot market electricity price falls and higher the renewables levy paid by consumers must climb to cover the difference between the market price of electricity and the generation costs of renewables.

The German government's introduction of a market bonus in 2012 for renewables electricity marketed outside the feed-in tariff system does not address this, although it does encourage renewables companies to become involved in electricity trading.

At the same time, spot market electricity prices are too low to trigger new investment in back-up power stations, which, although widely assumed to be necessary for the medium term, will run for fewer hours each year as renewables contribution grows.

Daniel Kluge, spokesman for federal renewables association Bundesverband Erneuerbare Energie, said: "The spot market system that we have is becoming increasingly inappropriate. We need a new market design oriented to the needs of renewable energies."

Have you registered with us yet?

Register now to enjoy more articles
and free email bulletins.

Sign up now
Already registered?
Sign in