This is an invited article for the ECECP “EU-China Energy Magazine” – 2021 Autumn Issue.
Electrification of energy consumption with a high share of renewable energy is one of the main pillars of the low-carbon energy transition. Many advanced economies, such as Germany, have achieved a high share of variable wind and solar in their electricity systems: in 2021, Germany is likely to generate over half of its electricity from renewables, of which over 20% will come from wind and over 10% from solar. In the 2021 revision of its Renewable Energy Act, Germany has set the target to achieve 65% renewable energy in gross electricity consumption by 2030. The Law also stipulates that before 2050, all electricity that Germany produces or consumes on its territory is carbon neutral. In 2019, Germany had an average supply interruption duration per connected final consumer per year of 10 minutes on medium voltage levels and 2 minutes on low voltage levels. The German electricity system is one of the most reliable systems in the industrialized world, which illustrates the ability of the German grid to flexibly handle a power generation structure with increasing renewable energy share.1
In many countries variable renewable energy still faces a variety of obstacles. And although many analysts cite market design and institutional incentives as the most important factors blocking greater integration of renewable energy,2 within the power sector many experts continue to cite technical hurdles as well. For example, in China, the distance between renewableproducing regions in western China and consumption centres in eastern China, as well as the high share of combined-heat-and-power (CHP) in winter months in northern China, are often mentioned to explain curtailment of wind and solar energy.3
How is Europe improving flexibility to improve integration of renewable energy? How does China’s power system flexibility compare? To answer these questions, we begin by discussing the current and future plans and policies of Germany and the EU regarding flexibility, and then summarize the results of a recent study quantifying the flexibility in Germany
How is Europe improving flexibility to improve integration of renewable energy? How does China’s power system flexibility compare? To answer these questions, we begin by discussing the current and future plans and policies of Germany and the EU regarding flexibility, and then summarize the results of a recent study quantifying the flexibility in Germany and the region of China near Beijing.
How Germany and Europe are achieving high flexibility
In general, the main reforms necessary to achieve the energy transition in Germany through 2020 have consisted of power market reforms and incentives to encourage flexibility and efficiency.
Power market reforms began in 1996 with the first EU regulation on liberalizing power markets, requiring the unbundling of generation, transmission, distribution, and trading.4 These reforms, carried out in Germany after 1998, included establishing a spot market and achieving a high volume of spot market transactions, as well as establishing a balancing energy market across Germany, increasing the integration of German markets with neighbouring markets, and establishing detailed roles and responsibilities for balancing. The German power market is an energy-only market, meaning that generators only are paid for generated energy (not for the willingness to generate as in a capacity market).5 As the renewable energy share rises and price fluctuations increase, plants that can ramp up and down faster, more flexibly, are incentivized through energy prices. Germany’s balancing energy market, which comes into play in the case of sudden and unexpected surges or drops in load, also incentivizes flexibility by rewarding those producers who can quickly feed in additional energy or reduce feed-in and consumers who can quickly take load off the grid or increase load.6
How Europe will improve flexibility in the future
To achieve its climate and energy goals, Europe intends to improve crossborder electricity interconnections. Connecting Europe’s electricity systems should allow the EU to boost its security of electricity supply and to integrate more renewables into energy markets. Hence, the EU has set an interconnection target of at least 10% by 2020, to encourage EU countries to connect their installed electricity production capacity. This means that each country should have in place electricity cables that allow at least 10% of the electricity produced by its power plants to be transported across its borders to neighboring countries. The EU plans to reach an interconnectivity of 15% by 2030.7 Moreover, the new EU Electricity Regulation, which entered into force in 2020, stipulates that cross-border electricity connections must be opened to a larger degree for cross-border trade. The trade capacity levels are to be incrementally raised until 70% of connection capacities are actually made available for crossborder trade. This will help boost pan- European trade in electricity and avoid member states curtailing cross-border interconnection capacity to deal with internal bottlenecks.
The EU’s Ten-Year Development Planning has also helped address transmission bottlenecks and ensure that interconnectors can enable a fully integrated clean energy system in time for carbon neutrality. The EU’s transmission planning process relies on generation and demand scenarios— accounting for weather and seasonal renewable variations—designed by multiple stakeholders. This planning method produces superior results to other systems that use simplistic rules-of-thumb about utilization rates or renewable percentage to plan and design individual lines. Such systems can produce suboptimal results, since they place too little value on demand flexibility, distributed energy, and improved dispatch, while overvaluing centralized generation can cause excessive investment in stable output— such as costly central energy storage or backup fossil plants to even out production only on the supply side.
Distributed energy and energy storage are also strategies for improving flexibility in the medium and longterm. The development of solar energy in many parts of Europe and North America in the early 2000s initially began with a relatively higher policy emphasis on distributed residential solar, despite the high cost of rooftop solar. Only recently have these regions seen stronger interest in pairing energy storage with residential solar. Today, almost 70% of new home solar PV installations in Germany come with battery energy storage. The country’s residential storage market represented around 2.3 GWh of installed capacity by the end of 2020. There are now more than 300,000 battery storage systems installed in German households, with the average installation size around 8-9 kWh.8 Germany may install 150,000 residential batteries in 2021, accounting for around 1.5 GW, or two-thirds of new battery installation capacity for 2021.9
The demand side will also play an increasing role in providing flexibility, such as through thermal energy storage via small scale heat pumps, off-peak or coordinated electric vehicle charging, and aggregation of demand through virtual power plants. A virtual power plant (VPP) can be defined as a central IT system that controls or aggregates decentralized power-generating technologies, energy storage technologies, or flexibility-providing demand-side resources that are mainly connected to the distribution grid or near to end users.
The 2012 European Union Directive on Energy Efficiency first established aggregators for load management. The 2019 Clean Energy for All Europeans package encourages member states to create favorable conditions for energy suppliers and citizen energy communities to participate in power markets in a non-discriminatory manner with other generation.10 In Germany, the Federal Network Agency (BNetzA) established a VPP industry guideline in 2016, 11 and a 2021 revision of the German Energy Industry Law added information obligations between aggregators and consumers.12 VPPs in Germany can participate in long-term power markets and spot power markets, as well as in the balancing market, which may be considered ancillary services in the Chinese context. Most transactions take place in the spot market: VPPs are active in both day-ahead and intraday markets and can offer rapid and controllable flexibility in the 15-minute and 1-hour markets, which are active up to 5 minutes before delivery.
VPP participation in the balancing market takes two forms: via the spot market, and via a tender organized by the Transmission System Operators (TSOs), and recently most are participating via this tender mechanism. VPP participate in the ancillary services markets, including the automatic (5 minute) and manual frequency regulation markets, and compensated using both capacity price and energy price based on actual usage. VPPs can also participate in tenders for interruptible loads with the TSO, which applies to loads down to 5 MW. Interruptions may be signaled electronically to customers or to aggregators. The German VPP market is small but growing. The largest VPP, Next Kraftwerke, aggregates 11,049 generators for 9 GW of power, including PV, batteries, small hydro, and biomass. Sonnen, a battery company, aggregates PV and batteries for its customers, participating in energy trading and balancing services. Heating and cooling equipment provider Viessmann has recently launched a VPP that will integrate heat pumps and thermal energy storage for electricity storage.
New study shows German system more flexible than similar region in China
While it has long been recognized that long-distance transmission systems, coal plants, and CHP plants in Europe are operated more flexibly than those in China, it has never been easy to measure this in practice. To help policy makers, grid operators, and power sector participants understand the best path for improving flexibility, the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH and researchers at the Energy Research Institute of NDRC and the North China Power University sought to quantify the flexibility of the existing system, compare the system’s flexibility to best practices in regions with a higher share of renewables, and quantitatively analyze the costs and flexibility benefits of various strategies for improving flexibility. The report is a result of the Sino-German Energy Transition project, implemented by GIZ on behalf of the German Federal Ministry of Economic Affairs and Energy.
In report about the analysis, A Quantitative Comparative Study of Power System Flexibility in Jing-Jin-Ji and Germany, we used five metrics to quantify flexibility in Germany versus Jing-Jin-Ji—the region comprising Beijing, Tianjin, and Hebei, altogether has a larger population and electricity load than Germany.13 The five metrics are the Loss-of-Load-Probability (LOLP), the probability of insufficient downward flexibility, the probability of insufficient upward flexibility, and the curtailment rate of wind and solar. We used historical data to ensure reliability, though future analysis will likely consider projected data as well. The overall results show that the Jing-Jin-Ji region of China lacks the flexibility of Germany’s power system. North Hebei has a high loss-of-loadprobability (LOLP), in both winter and summer, and lacks downward flexibility in both seasons. This inflexibility contributes directly to curtailment of renewable energy.
The report further compares the cost of four strategies for upgrading the flexibility of the region’s power system: coal plant flexibility retrofits, upgrades to existing transmission, energy storage, and demand-sidemanagement. The model used in the study finds the greatest flexibility benefit for coal plant retrofits. China has missed targets for coal plant flexibility retrofits in recent years.
Improved interconnections are also a cost-effective strategy, though the benefit is not quite as pronounced. Assuming renewable capacity continues to grow, improved interconnections and operational flexibility of interconnections will be necessary. Currently, the region’s interconnections are mainly used as emergency backup, to provide baseload energy, or to serve peak loads. Interconnections are not yet operated to facilitate bidirectional power flows, enable regional spot markets, or provide short-term balancing across provincial or regional boundaries. Using energy storage costs from 2018, the report found that this was the least effective strategy, though as storage prices go down and as more renewable plants acquire onsite storage to comply with recent requirements, storage will likely play a role in Jing-Jin-Ji’s future flexibilization.
The German case shows that improved flexibility has helped the country reach nearly 50% renewable energy generation while keeping the grid stable and supply highly reliable. As the need for flexibility grows along with new wind and solar additions, more will be needed. Well-functioning power markets, thermal plant flexibility retrofits and transmission are the first solutions for improving flexibility. Once these have been fully achieved, distributed energy storage and demand-side flexibility come into play. All will be needed to achieve high levels of renewable energy and carbon neutrality.
By Anders Hove
Deutsche Gesellschaft für Internationale
Zusammenarbeit (GIZ) GmbH
Click here to download report:
- “Die Energie der Zukunft. 8. Monitoring-Bericht zur Energiewende –Berichtsjahre 2018 und 2019”, BMWi, on 9 August 2021, at https://www.bmwi.de/Redaktion/DE/Publikationen/Energie/achter-monitoring-bericht-energie-der-zukunft.pdf.
- “Comments on National Energy Administration’s ‘Advancing Electricity Spot Market Implementation,’” Regulatory Assistance Project, March 2019, at https://www.raponline.org/wp-content/uploads/2019/03/rap-comments-NEA-march-2019-spot-marketpolicy-EN.pdf; Hao Zhang, “Prioritizing Access of Renewable Energy to the Grid in China:Regulatory Mechanisms and Challenges for Implementation,” Chinese Journal of Environmental Law, 3 December 2019, at https://brill.com/view/journals/cjel/3/2/article-p167_3.xml.
- Qi Ye et al., “Wind Curtailment in China and Lessons from the United States,” Brookings Institution, March 2018, at https://www.brookings.edu/wp-content/uploads/2018/03/wind-curtailment-in-china-and-lessons-from-the-united-states.pdf.
- “20 Jahre Strommarkt-Liberalisierung: Befreiung für saubere Energiewende-Lösungen“, Agentur für Erneuerbare Energien, on 27
April 2018, at https://www.unendlich-viel-energie.de/themen/politik/europaeische-union/artikel14031; “Was versteht man unter Liberalisierung und Unbundling von Strommärkten?“, NextKraftwerke, accessed on 19 August 2021 at https://www.next-kraftwerke.de/wissen/liberalisierung-strommaerkte
- “Was ist der Energy-Only-Markt?“, NextKraftwerke, accessed on 20 August at https://www.next-kraftwerke.de/wissen/energy-onlymarkt.
- “Incentivizing Flexibility: The Role of the Power Market in Germany,” Sino-German Energy Partnership, October 2019, at https://www.energypartnership.cn/fileadmin/user_upload/china/media_elements/publications/2019.10_Flex_Studie/EN_Final_giz_Study_Flexibility_2019_Web_1029.pdf.
- “Electricity interconnection targets”, European Commission, accessed on 19 August 2021 at https://ec.europa.eu/energy/topics/infrastructure/electricity-interconnection-targets_en.
- Andy Calthorpe, “More than 300,000 battery storage systems installed in German households,” Energy Storage News, 23 March 2021, at https://www.energy-storage.news/news/more-than-300000-battery-storage-systems-installed-in-german-households.
- Sandra Enkhardt, “Germany may install 150,000 residential batteries this year,” PV Magazine, 20 May 2021, at https://www.pvmagazine.com/2021/05/20/germany-may-install-150000-residential-batteries-this-year/.
- “DIRECTIVE (EU) 2019/944 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 5 June 2019 on common rules for the internal market for electricity and amending Directive 2012/27/EU (recast)“, Official Journal of the European Union, on 14 June 2019, at https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/; Emiliano Bellini, “EU publishes directive, regulations for Clean Energy Package”, PV Magazine, on 17 June 2019, at https://www.pv-magazine.com/2019/06/17/eu-publishes-directive-and-regulations-forclean-energy-package/
- “Beschluss Az. BK6-17-046”, Beschlusskammer 6, Bundesnetzagentur, on 14 September 2017, at https://www.bne-online.de/fileadmin/bne/Dokumente/Englisch/Policy_Papers/BNetzA_BK6_17_046_Beschluss_vom_14_09_2017.pdf .
- “Energiewirtschaftsgesetz (Gesetz über die Elektrizitäts- und Gasversorgung)“, 16 July 2021, at https://dejure.org/gesetze/EnWG/41e.html.
- Zhang Yanan et al., “A Quantitative Comparative Study of Power System Flexibility in Jing-Jin-Ji and Germany,” Energy Research Institute of National Development and Reform Commission, December 2020, at https://www.energypartnership.cn/fileadmin/user_upload/china/media_elements/publications/Power_system_flexibility_in_Jingjinji_and_Germany.pdf.