German electricity grid upgrade ‘will be expensive’, experts warn

21.02.2022Media

Germany’s power grid is in dire need of upgrade to ensure stable supply in a country aiming to source 80% of its electricity from intermittent wind and solar by 2030.

The growing focus on electricity grids is driven by the EU’s climate targets for 2030 and 2050, which were put into law last year. The share of electricity in Europe’s energy mix needs to roughly double by mid-century in order to reach the EU’s climate goals, the European Commission estimates.

“Increased flexibility will be key to adapt our electricity system further towards variable and distributed renewable electricity generation,” explained EU Commission Vice-President Maroš Šefčovič who spoke at an online event on 7 February.

Grid flexibility is also high on the agenda of the new German government, which announced big plans in November to quadruple solar PV installations on all rooftops and push renewable energy capacity to 80% of the country’s electricity mix before the end of the decade.

“The task now is to meet the increasing demand for flexibility and to make the energy supply climate-neutral in the long term,” explained Joachim Kabs, managing director at VDE, the German association for electrical, electronic and information technologies.

“To this end, we want to further develop the interaction of generation and consumption plants as well as storage facilities with the grid, accelerate digitisation and systematise the interfaces between the players in the energy system,” he said during his inauguration last year.

In Germany, any discussion on electricity is inevitably tied to the country’s unsuccessful efforts to expand its transmission infrastructure. While most of Germany’s wind capacity is located in the North near the Baltic Sea, big industrial consumers tend to be located in the South.

“Electricity and hydrogen networks are the backbone of the energy system of the future,” writes the new German government in its coalition treaty. In total, Germany is planning to build 12,000 kilometres of extra electricity lines, but progress has been slow.

While 1,800 kilometres of high voltage lines have already entered operation and 700 are under construction, the vast majority continues to be at the planning stage.

Just for expanding the high voltage network, the German federal network agency expects added costs of about €55 billion by 2030. But the costs expanding the grid likely won’t stop there.

But those plans have faced resistance from local communities, with farmers protesting against plans to accelerate grid expansion and bird protection activists filing lawsuits against project developers in the name of biodiversity protection.

The cost of flexibility

In Brussels, policymakers dream of so-called “smart grids”, where digitalisation and artificial intelligence help manage demand and drive down consumer’s electricity bills.

Digital technologies can also prevent a costly expansion of the electricity grid, Šefčovič said at the February event. “In particular, batteries and hydrogen can be major sources of flexibility,” the commissioner added, saying: “We can also be more flexible by making better use of all the devices that are connected to the grid, such as heat pumps, car batteries or fridges”.

But others warn about the costs this would incur. According to VDE, those are derived from the transition to a less predictable electricity generation system dominated by renewables instead of the current one where conventional power plants can react promptly to changes in demand.

This transition will require the deployment of additional technologies and carries the risk of comfort losses for consumers, both of which will come at additional costs for the energy system, VDE warned in an “impulse paper“.

The technologies cited by VDE to address this include batteries that can absorb overproduction of electricity during windy days, thermal storage, grid reinforcements, and digital communications infrastructure.

But extra costs may also arise from something that many expect will come for free: peak load shifting. Generally, electricity demand peaks multiple times during the day, for example in the morning when kettles and water heaters are turned on and at night when people come back from work and switch on their devices.

While some load shifting is expected to “come about for free” in the form of thermal storage and household batteries, further demand management technology will have to be installed on the network side, VDE says.

“If half of all German households were to install a home [energy] storage system, this would result in an acquisition cost in the higher double-digit billion range,” the experts note. And depending on battery lifetimes, these costs could be recurring every five to eight years, they add.

Furthermore, some electricity users are likely to oppose remote demand control measures being imposed on them from outside. VDE takes the example of a washing machine to illustrate its point. Encouraging households to run a washing cycle at a specific time – at nighttime when electricity demand is lower for example – would likely require financial incentives that go far beyond the price of electricity, the association says, estimating the cost at “€1 per wash cycle.”

For VDE, the conclusion is clear: flexibility comes at a cost. “We assume that these costs are high – especially in connection with the necessary control technology and all its risks,” it writes.

The experts also warn against over-reliance on market-based solutions. “Another approach, namely that ‘the markets will take care of all this on their own’ and ‘many new innovative products would certainly emerge around the topic of flexibilisation’, lacks depth in our view,” the VDE paper concludes.

The promise of vehicle-to-grid

Some solutions are expected to emerge from changing consumption patterns – especially in the transport sector, with 15 million electric vehicles expected to hit German roads by 2030.

While electric cars are expected to add significant strain on the network, they also hold the promise of functioning like a decentralised home battery. Known as “vehicle-to-grid”, the technology assumes that smart grids will be able to pull power back from car batteries at times of high electricity demand.

“We tested this out years ago in a pilot project and it worked very well, despite electric mobility being in its infancy,” explained Markus Adam, senior staff at German utility LichtBlick. “Fortunately, the car manufacturers see it the same way. Volkswagen in particular is very, very progressive,” he told weekly business magazine WirtschaftsWoche in February.

In return, car owners would be remunerated for providing balancing services to maintain the frequency of the transmission grid during peak hours. That would amount to “100 to €200 a year,” Adam added, saying this was “nothing to get rich with”.

Still, Adam painted an optimistic picture for grid flexibility services relying on car batteries.

“We would like to set up a corresponding virtual power plant that bundles all these vehicles nationwide via algorithms and then places this power bundled on the energy markets, i.e. we are the service provider between the vehicle, driver and the energy market at the end,” he said, laying out LichtBlick’s vision.

And as the number of electric vehicles increases, the capacity of those “virtual power plants” could be surprisingly high. If all works out as planned, the storage capacity of electric vehicles  could “replace the capacity of nuclear power plants” in Germany, Adam said.

 

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