Transformation of Energy System in Germany
In the year 2000 Germany had less than 7% renewables in their system, most of which at the time was hydro. Today Germany has penetration of 32% renewables in their power system.
They put all different power production technologies they knew from wind, photo voltaic, biomass to geothermal on the same starting line and took the risk away from investors. The government guaranteed one to one return for every kilowatt hour investors feed into the grid.
Some technologies like geothermal didn’t win the competition. Biomass reached the limit of nature conversation of food production. The real winners of this technological race are wind and solar.
Main different features of these technologies are that they produce according to weather conditions. They fluctuate very strongly and they don’t have any operational cost. These three features are the main reasons Germany reinvented their power system.
The challenge in the new energy system is how to synchronize this fluctuating production from wind mills and solar panels with the demand of the customers. Germany has done a few things to overcome this issue.
First, moving the renewables closer to the market.
New generators have to participate in an auction to get market premium rates. If the rate is negative they don’t produce anymore. In other words, lower risk!
Second, preparing the market for the growth of renewables.
They brought flexibility in many aspects of the industry from demand, generation, and storage to cross border trades.
Third, focusing on decentralized infrastructures.
In one hand the limited capacity of the grids requires the new generators to be interconnected with the consumers. In the other hand, security of the data on smart meters and privacy of the customer introduces the concept of digitalization to the system. There are 1.6 million power generators and 82 million private consumers in Germany aside from interconnected markets in the neighboring countries. Consumers have over 350 different companies to buy their electricity from vs there is only one option in California.
These challenges have created many business opportunities in digitalization of the grids and large scale storage units. It has created the opportunity for new platforms that help consumers find the best providers. There have been solutions that combine resources for flexible generation or demand segments.
These competitions in developing new market models which reduces the cost and helps the energy transition to be not only an ecological success but also and economic one in Germany.