The German Energiewende : Challenges and options Dr. Frank-Detlef Drake, Head of R&D, RWE AG Dr. Burkhard Pahnke, Investor Relations, RWE AG Paris, March 7th, 2014
1 2 3 4 The German Energiewende and other transformation pathways Impact from increasing share of renewable energy Four ways to integrate volatile power from renewables Perspective on Europe and beyond PAGE 2
A low carbon energy supply is feasible if three levers are applied simultaneously Generation Infrastructure Demand High efficiency 1 Low-CO 2 electricity mix 2 More electricity 3 PAGE 3
Two theoretical paths towards a low-co 2 electricity system to be achieved by 2050 Main elements Indicated preference 1 Short bridge > Quick and massive expansion of renewables > No construction of conventional or nuclear power plants > Massive development of grid infrastructure and, if necessary, storage facilities 2050 2 Long bridge > Continuous expansion of renewables > At least one more round of conventional and nuclear power plant new-build > Use of carbon capture & storage > Gradual adaptation of infrastructure in line with change in generation Photo: Wikipedia.org/Sandö Bridge 1) Carbon Capture and Storage PAGE 4
Germany strives via the short bridge for a share of 80% renewables in the power generation sector Energy concept of the German Federal Government 17% Decrease of power consumption 25% 58% Import 20% -45% Renewable energy sources (approx. 80% of power generation) 45% 25% Nuclear Conventional power generation 2010 2020 2030 2040 2050 10% Source: EWI / Prognos / GWS Study PAGE 5
1 2 3 4 The German Energiewende and other transformation pathways Impact from increasing share of renewable energy Four ways to integrate volatile power from renewables Perspective on Europe and beyond PAGE 6
The feed-in of electricity under the German Renewable Energy Act (REA) is leading to Short-term variable costs [ /MWh] Demand (midday) Hydropower Nuclear energy Lignite (new/old) Hard coal (new/old) Gas (new/old) Oil Market price Generation capacity PAGE 7
the market price for electricity dropping and conventional plants being forced out Short-term variable costs [ /MWh] Demand (midday) Hydropower Nuclear energy Lignite (new/old) Hard coal (new/old) Gas (new/old) Oil Market price old new Margin loss REA Generation capacity PAGE 8
M-shaped electricity price curve on sunny days Example: 20 February 2012 /MWh 90 80 70 60 50 40 30 20 10 Gigawatts 9 8 7 6 5 4 3 2 1 0 0-1 1-2 2-3 3-4 4-5 5-6 6-7 7-8 8-9 9-10 10-11 11-12 12-13 13-14 14-15 15-16 16-17 17-18 18-19 19-20 20-21 21-22 22-23 23-0 0 Electricity price EEX hour contract Phelix (left-hand scale) Electricity feed-in from photovoltaic (right-hand scale) Sources: EEX, RWE Supply & Trading PAGE 9
Gas power plant load hours significantly reduced from previous years Example: Gersteinwerk (since 2012 only in winter operation ) Production in June and July 2009 Megawatts 400 300 200 100 Production in June and July 2011 Megawatts 400 300 200 100 0 June 2009 July 2009 0 June 2011 July 2011 PAGE 10
German electricity feed-in from wind and solar energy in February 2012 (cumulative) Gigawatts 25 20 15 10 5 0 Source: RWE Supply & Trading Photovoltaic Wind PAGE 11 1 Feb 2 Feb 3 Feb 4 Feb 5 Feb 6 Feb 7 Feb 8 Feb 9 Feb 10 Feb 11 Feb 12 Feb 13 Feb 14 Feb 15 Feb 16 Feb 17 Feb 18 Feb 19 Feb 20 Feb 21 Feb 22 Feb 23 Feb 24 Feb 25 Feb 26 Feb 27 Feb 28 Feb 29 Feb
PAGE 12 1 Aug 2 Aug 3 Aug 4 Aug 5 Aug 6 Aug 7 Aug 8 Aug 9 Aug 10 Aug 11 Aug 12 Aug 13 Aug 14 Aug 15 Aug 16 Aug 17 Aug 18 Aug 19 Aug 20 Aug 21 Aug 22 Aug 23 Aug 24 Aug 25 Aug 26 Aug 27 Aug 28 Aug 29 Aug 30 Aug 31 Aug and in August 2012 Gigawatts 25 20 15 10 5 0 Source: RWE Supply & Trading Photovoltaic Wind
Biggest problem with renewable energy: Their availability is not in our hands Gigawatt 25 20 Wind and solar can at times cover over one third of the electricity demand and then almost drop off the radar again Photovoltaic Wind 15 10 5 0 Conventional power plants are needed to guarantee the security of supply But the expansion of renewable energy is making conventional power plants ever more unprofitable 1Aug 2 Aug 3 Aug 4 Aug 5 Aug 6 Aug 7 Aug 8 Aug 9 Aug 10 Aug 11 Aug 12 Aug 13 Aug 14 Aug 15 Aug 16 Aug 17 Aug 18 Aug 19 Aug 20 Aug 21 Aug 22 Aug 23 Aug 24 Aug 25 Aug 26 Aug 27 Aug 28 Aug 29 Aug 30 Aug 31 Aug PAGE 13
Steep increase of subsidies granted under the German Renewables Energy Act Share of renewable energy in German electricity production 23% Extra costs in x billions Value of the electricity in x billions 14% 15% 16% 17% 21% 16.5 12% 10% 9% 7% 7% 8% 8% 13.3 12.5 5.6 9.8 5.1 4.6 3.5 2.9 2.5 5.2 3.3 3.9 3.4 4.2 4.7? 0.9 1.1 1.7 1.8 0.3 0.5 0.5 0.8 1.1 1.6 2.3 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Source: BDEW PAGE 14
Private household electricity bills since 1998: State share doubled to 50% Electricity price Cent/kWh 1) Ø Annual growth rate since 1998 Component 1998 2013 Generation, transport, sales 12.91 Electricity tax 14.13 2.05 + 0.6% Renewable Energy Act Offshore wind levy 0.08 5.28 0.25 Combined Heat and Power Act Levy per 19 StromNEV 2) 0.33 0.13 + 8.5% Concession levy 1.79 1.79 Value-added tax 2.33 4.55 Total 17.11 28.50 + 3.5% 1) kwh = Kilowatt hour 2) Stromnetzentgeltverordnung (StromNEV) = Electricity Grid Fee Ordinance PAGE 15
Renewable Energy Act: A second transfer scheme between the states million Net REA in-/outflows in 2012 by states ( Länder ) 2,000 1,230 1,000 413 408 0 308 249 229 10-115 -116-144 -209-320 -366-471 -613-1,849-1,000-2,000 PAGE 16 Bavaria Schleswig-Holstein Brandenburg Saxony-Anhalt Lower Saxony Mecklenb.-West Pomm. Thuringia Bremen Saxony Saarland Rhineland-Palatinate Hamburg Berlin Baden-Württemberg Hesse North Rhine-Westphalia Source: BDEW
1 2 3 4 The German Energiewende and other transformation pathways Impact from increasing share of renewable energy Four ways to integrate volatile power from renewables Perspective on Europe and beyond PAGE 17
Four principle ways to cope with increasing volatile power generation from renewable energy sources Power generation Power consumption 230 V 50 Hz Potential solutions/measures Flexible power generation 1 2 Expansion of electricity grids Smart technologies 3 4 Energy storage PAGE 18
Solution 1 Flexible power generation There are several technical measures to increase power plant flexibility Measures are aiming at faster ramp up and lowering minimum power output Increase ramp up Reduce minimum load Reducing wall thickness Usage of once-through boilers 1) Compatible component selection Separation of milling and combustion NO X - catalyst CO combustion Optimized mill control Increasing number of mills Coal -- -- CCGT -- -- -- -- relevant not relevant > Cost-effective life-time extension/optimisation of existing plants essential 1) Thick-walled drum not applicable PAGE 19
Solution 2 Expansion of electricity grids Excess feed-in increases the demand for transport grids and stresses the distribution grids 2010 2022!!!! Load Wind (onshore/offshore) Photovoltaic Other renewable energy sources Source: RWE Analysis, TSO grid development plan PAGE 20
Solution 2 Expansion of electricity grids In future the role of the distribution grid will change, it will achieve an active role within the energy system Hierarchical system without decentral feed-in Future structure of electric supply Customer Max V > More decentralised generators connected to the grid Max V High V Med V Low V > No defined load flow > Distribution grid with control of decentralised customer systems M G M M G M G G High V Med V Low V > Relocation of the system responsibility possible PAGE 21
Solution 3 Smart Technologies Smart load control contributes to system stability, but it cannot solve the challenges in principle Smart metering/smart grid Smart-Meters are making the energy consumption transparent in real-time and incentivise the customers for energy saving E-Mobility > Area-wide network of charging stations > Smart integration into the grids are possible DSM/Smart home > Smart control of consumer appliances and integration of local power generation > In households, trade and Industry Heat pumps > Heating with low carbon foot-print > Well controllable, high loads for DSM > Many innovative smart products and business cases under development at RWE PAGE 22
Solution 4 Energy storage Recent RWE-research shows that significant additional central storage will only be required with a renewables share of more than 50% Increasing share of power generation from renewable sources due to the Energiewende 20 to 25% 35 to 40% 50 to 60% 75% to 100% New pumped hydro Compressed air Power-to-gas Today 2020 2030 2050 Relevance of new storage PAGE 23
Solution 4 Energy storage Decentralised batteries in combination with PV might become attractive soon on the basis of increased self-consumption Local PV power generation and consumption will be decoupled time-wise For a typical 1) B2C customer a battery will increase the self consumption by about 20% 100% Household power consumption kw Battery charging 80% 15,00 kwh 5,00 kwh Battery discharging PV self consumption 60% 40% +20% 0,00 kwh PV power generation 20% 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 hour of the day 0% 1 2 3 4 5 6 7 8 9 10 PV system size [kwp] > With decreasing battery prices home-storage could become profitable for the investor soon However, from a macro-economic viewpoint, decentralised batteries are least cost-effective Both views (investor and macro-economic) need to be monitored! 1) Family household, 4,500kWh annual consumption, 5 kwh battery, 5 kwp PV PAGE 24
1 2 3 4 The German Energiewende and other transformation pathways Impact from increasing share of renewable energy Four ways to integrate volatile power from renewables Perspective on Europe and beyond PAGE 25
Combination of flexible generation and grid expansion is the most cost-effective way Times of surplus energy > 10 GW 5 10 GW 1 5 GW < 1 GW new Times w/o sun and wind Demand in GW With super grid EU 150 w/o super grid ~ 400 Conv. capacity today 400 Requirement Advantage Challenge Doubling of grid capacity needed (2030) > Cost-effective: Full European grid <10% of capex in generation > Increasing amount of secure power from renewables due to interconnection > Public acceptance > Complex and long permission and approval processes Realisation highly challenging Flexible operation of generation fleet > Back-up capacity is more cost-effective than storage or DSM 1) > Existing power plants partly capable for more flexibility > Very low utilisation of back-up plants, ( new market models required) > Acceptance of conventional plants (old and new built) 1) Demand Side Management Source: ECF Scenarios PAGE 26
A pan-european approach has significant cost advantages Average LCOE per scenario, 2050 [ /MWh, real terms] Storage facilities Distribution grid Ultra high voltage grid Generation 97 30 8 59 +19% 115 33 10 72 180 22 133 39 36 10 12 +37% +86% +142% 85 109 235 38 45 10 142 Base Long bridge Short bridge National 100% case 1) (European) (European) renewables CO 2 reduction in % 2) : (Germany) Local/distributed (Germany) 20% CO 2 reduction in each scenario > 85% 1) Today s generation mix continued with modernisation/reinvestment 2) Compared with today (2008); assumption: constant quantity of electricity PAGE 27
Desertec also builds on grid expansion to make optimal use of the huge potential of renewable energy sources across EUMENA 1) 1) Europe, Middle East, North Africa PAGE 28
Thank you very much for your attention! If you want to know more: www.rwe.com/innovation PAGE 29
In any scenario, fluctuating power generation will continue to increase Contribution of renewable energy to the gross power generation Germany (2000 to 2013) Variation of the solar irradiation 2009-11-9 [TWh] 160 150 140 130 120 110 100 90 80 70 60 50 40 30 20 10 0 6 7 Share PV Wind Hydro Power Biomass 10 9 8 8 12 14 15 16 17 20 22 24 [%] 24 22 20 18 16 14 12 10 8 6 4 2 0 Radiation W/m 2 0 06:00 12:00 18:00 Source: Alfred Wegener Institute Wind power feed-in 2008 MW 1500 1000 500 20.000 15.000 10.000 5.000 2000 2005 2010 2012 2013e 0 Jan Mar May Jul Sep Nov Jan Source: BMU, July 2011; Fraunhofer ISE, July 2012; own assessment PAGE 30
Feed-in of PV smoothes down mid-day peak in Germany and reduces peak-power prices Relative Spot market prices (annual average) [%] 250 200 150 100 50 0 relative prices 00.00 h 01.00 h 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Hour of the day 2007 2008 2009 2010 2011 > Massive feed-in from PV has rising impact on the economics of conventional generation PAGE 31
Volatile power generation causes a number of challenges Selection Grid Conventional power generation Grid capacity Grid stability Technical challenges Commercial challenges High feed-in from new locations Generation/feed-on on low voltage level (bidirectional) Capacity not sufficient Challenges for: Frequency stability Voltage stability Phase angle stability Additional measures necessary Overarching: Balance of - Excess production in times of high feed-in - Lacking coverage in times of low feed-in (on hourly up to seasonal basis!) Steep gradients More up and down Higher maintenance Reduced efficiency Retrofit/new built Lower utilisation Lower margins Economics endangered In times of low RES feed-in: Full load to be covered by conventional plants! PAGE 32