Montag, 21. Oktober 2013

The age of renewable energy: grid and market integration

8th European Conference on Green Power Markets – Europe’s Forum for Renewable Energies

Conference Summary – The State of Green Power

With a proven record of seven successful conferences over the last twelve years, tracing in detail the development of a booming sector, participants at the 8th European Conference on Green Power Markets on 10 and 11 October 2013 in Geneva were sure what to expect from the event they attended: hands-on experience and market information delivered by a carefully selected line-up of political and commercial stakeholders.

There is no denying that renewable energy sources (RES) have entered the electricity mainstream. Across the European Union, total RES-E output grew by 40% in the last ten years, reaching an impressive 34 % of installed capacity as early as 2011. PV and onshore wind, moreover, are predicted to outstrip hydropower in terms of capacity additions by the end of 2013. Second-generation RES, and the most volatile at that, have by now reached technological and market maturity, covering essential shares of electricity production! Though expansion needs to continue, nay, accelerate, if the ambitious EU 2020 targets are to be met, a certain optimism is warranted. Europe has been the starting point, and still is the pacemaker, of a global transition. Indeed, RES growth may have been stronger than politics expected, and both the grid and the market can readily digest.

“Feed-in tariffs [FIT] have been too successful”, Adam Brown from IEA was quick to tell delegates in one of the opening speeches at the event. The results: spiralling costs – 0.3 % of Europe’s GDP in 2013! – and governments backpedalling on their previous commitments, such as Spain with its drastic PV subsidy cuts. Instead, a gradual adaptation of support schemes to better reflect the learning curves of technologies and align prices to market developments seems in order. Mario Ragwitz of Fraunhofer Institute for Systems and Innovation Research (ISI) expects Germany to make its optional feed-in premium a mandatory one or introduce reverse auctions as part of the price-conscious reforms surrounding its Renewable Energy Act (EEG), the forerunner, incidentally, for many FIT support schemes around the world. Guidelines on support design and reform from the European Commission are in the pipeline, too, and will aid in making the power sector less “un-investable”, as Beatrice Widmer of EURELECTRIC put it.

Despite the political drive to cost-efficiency and market compatibility, however, the basic technical constraints of large-scale distributed RES feed-in remain and need to be tackled as well. Balancing fluctuating loads is indeed nothing new to energy system management, and neither is the quadruplet of its implements. Dispatchable generation, storage, interconnection, and demand-side management are all well-established measures to foster flexibility; they only have to be scaled up and optimized to meet the renewables’ challenge. Here as elsewhere, a higher level of coordination, both vertically and across borders, promises to raise effectiveness. TSOs, as Mark Vogel of Swissgrid pointed out, are strongly calling for a step-up in European harmonisation efforts. Yet, some of the obstacles to the flexibility response lie within the market itself, it seems.

Plant operation in the energy-only market is based on marginal cost. Variable RES, for obvious reasons, are at the very bottom of merit order and will in the long run drive prices down and oust more expensive conventional plants – with or without containment by market signals! This not only leaves little economic incentive for much needed flexible production and storage facilities, but also puts market participants under huge financial strain. Traders have to cope with spot price unpredictability and shrinking profit margins, while utilities are groaning under unamortized assets and dwindling equity. With grid parity on the horizon, moreover, there is a new formidable foe – the self-supplying “prosumer”, who reduces distribution volumes and threatens the financiability of the entire system. Under these conditions, is a simple shift towards more market exposure, towards quota systems and green certificates trading, as marketers like Domenico De Luca of Axpo Trading recommend, the cure-all solution?

When it comes to Guarantees of Origin (GoOs), the voluntary market seems to have come to a halt. Trading companies and retailers are vying for new USPs to reinvigorate sales and make up for lost credibility in the face of sweeping policy-driven growth. Linking certificates with incremental production, as in the ECOHZ GO2 business model, is one such move. Additionality has actually become commonplace in the market. The opening in December 2012 of the first energy exchange for trading green power at Austria’s EXAA, where certificates are tied to physical delivery, is a telltale sign. Given these impulses, there is indeed some hope that “Grid and Market Integration” in “The Age of Renewables” will be financed not against but with and through the environmentally aware consumer. The last presentation in the programme went to prove the point: with its “Vitale Vert” offer, Geneva’s municipal utility SIG has successfully managed to both boost and balance solar power consumption and production, and thus even surpass cantonal expansion objectives!