New gas-fired power plants are urgently needed, but there is no incentive to invest.
(Photo: Weisflog)
Berlin A broad alliance of different actors presents the federal government with recommendations for a reform of the electricity market. In addition to the price development of the past few months, the background is above all the growing demand for power plant capacity that is reliably available at all times in a world with a growing share of renewable energies. Gas-fired power plants and systems that produce electricity and heat at the same time are therefore important.
Plants that supply electricity as needed when the wind is not blowing or the sun is not shining, “are increasingly becoming the future key currency in the electricity market,” says the paper, which is available to the Handelsblatt. The authors of the recommendations for action want to give the Federal Ministry of Economics substantive impetus.
The aim is to create a system that provides incentives to make power available to the electricity market at all times. The Federal Association of Energy and Water Management (BDEW), the Association of Mechanical and Plant Engineers (VDMA) as well as the renewables sector, power grid operators, industry and consumer protection groups were involved.
The topic also takes up a lot of space in the coalition agreement between the SPD, the Greens and the FDP. It states that a “climate-neutral electricity system platform” will be used, “which will make concrete proposals in 2022 and involve stakeholders from science, business and civil society”.
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However, given the major energy policy challenges that arose from the Ukraine war, the topic has receded into the background. The platform is now expected to start work in February 2023.
It is undisputed that there is a need for action. With the increasing share of renewable energies in electricity generation, conventional power plants are used less and less. At the same time, the end of nuclear power is in sight, and the coal phase-out is a done deal.
As a result, the guaranteed power plant output that is available at all times and must always be used when not enough electricity is being produced from renewable sources is reduced.
Gas-fired power plants should step in when there is no wind
In the coming years, gas-fired power plants in particular will have to step in. However, the willingness to invest in the construction of gas-fired power plants tends to be zero, since not enough money can be earned from them if they are only rarely used.
So new instruments are needed that reward the availability of power plant performance. “For the back-up capacities, sufficient economic incentives must be created on a permanent and plannable basis in order to stimulate the necessary investments,” says Stefan Kapferer, head of the electricity transmission system operator 50Hertz. “The higher the share of renewables, the lower the share of guaranteed performance for which we have to find a market framework.”
However, gas-fired power plants will only be the solution in the medium term. “At the moment we are talking about gas-fired power plants, but in the future we will increasingly talk about power plants that produce climate-neutrally and flexibility options that include storage,” says Kapferer.
New gas-fired power plants will therefore be designed in such a way that they can later also be operated with hydrogen. Flexibility options mean, for example, solutions that can be used to control the demand for electricity. If, for example, industrial companies are willing to reduce their electricity purchases for a short time on the basis of contractual agreements under certain circumstances, less power plant capacity has to be provided.
Electricity market to be reformed
But renewable energies can also offer reliable power plant output. According to Simone Peter, President of the Federal Association for Renewable Energy (BEE), this aspect in particular should be reflected in the design of the future electricity market.
“Renewable energies became system-setting in the course of the energy transition. Now the electricity market has to be aligned to their needs by ensuring new dynamics in wind and solar expansion in a market-oriented manner and by stimulating flexibly controllable output from bioenergy and hydroelectric power plants, storage systems, combined heat and power (CHP) and electrolysers,” says Peter.
CHP plants produce electricity and heat at the same time. They are currently operated largely with natural gas, and in the future also with hydrogen.
BDEW General Manager Kerstin Andreae is convinced that time is of the essence: “We have to make progress with the further development of the electricity market design. The necessary investments will only be made if the framework is right.” It is crucial that the course is set before the end of this legislative period.
The recommendations for action are intended to help accelerate the process: “The strength of our impulse paper can be seen in the fact that we combine the views of system manufacturers, network operators, consumers and system operators. Consumer advocates, think tanks and trade unions were also involved in the discussions,” says Dennis Rendschmidt from the VDMA. Politics can build on that.
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