How controlling electricity demand can provide reliability

This is the conclusion of a study, commissioned jointly by Baden-Württemberg and Bavaria’s ministries of environment, and Berlin's energy policy think tank Agora Energiewende.

According to the environment ministers of Bavaria and Baden-Württemberg, Dr. Marcel Huber (CSU) and Franz Untersteller (Greens) respectively, as well as Agora director Rainer Baake, the study provides important information for Germany’s future energy policy: "The active control of electricity consumption is an important instrument for ensuring the safety of the power supply. Load management has so far received much too little attention. This new study shows just how much potential our businesses have to make a significant contribution to security of supply with relatively little effort."

The energy transition poses new challenges to the flexibility of the overall system and thus to security of supply. Thus, during the past two winters grid operators have contracted old power plants (with a capacity of up to 2.6 gigawatts) as so-called “cold reserve”, which would be utilized in the event of actual shortages. With the pending shutdown of nuclear power plants Grafenrheinfeld (2015) and Gundremmingen B (2017) there will be additional demand for security of electricity supply at times of peak demand, particularly in southern Germany. One of the ways to meet this challenge is the construction of new power plants - in addition to expanding the grid network and developing storage technologies.

The new study, prepared by the Fraunhofer Institute for Systems and Innovation Research and the Research Center for Energy Economics (FfE), shows that the demand side can be a factor, too: a significant part of the demand could be covered through greater flexibility of industrial processes in southern Germany. About 850 megawatts of electricity consumption could be switched off for a period of two hours and moved to a later date. As for a shorter period of only 30 minutes, even 1.2 gigawatts could be shifted. Thus, because many grid bottlenecks exist only for a short time, German industry can make an important contribution to security of supply. In addition, there is relevant load shifting potential in the field of heat pumps and night heat storage (the volume of which is dependent on time of day and temperature).

According to Baake, "In this study, we show that with the technology available today and installed control mechanisms, the demand side can provide flexibility in the same order of magnitude as one or two large, peak-load power plants in the short term. But the current incentives of the existing electricity market are not enough to tap this significant potential. We therefore need a competitive market for supply security that supplements the existing energy market.”

To tap the load management potential, in the coming months the ministries and Agora Energiewende will examine how the rules of the electricity market need to be changed so that the demand side actively participates in it. Corresponding models will be introduced into the discussions on future electricity market design at the federal level.

Proposals for a new market design, such as incentives to build new power plants, are already on the table, said Baden-Württemberg´s Environment Minister Franz Untersteller. He has already made a strong push for the creation of a capacity market: "I have the impression that this idea is finding more and more friends. In such a capacity market, the provision of electricity capacity would already be monetarized. If properly designed, we’d create incentives for the construction of highly efficient and largely climate friendly gas power plants, which we need for the energy transition." By capacity, he underscored, he meant more than just the construction of flexible power plants: "The necessary capacity market must include all three kinds of capacity: generating capacity and storage, as well as flexible demand in the form of flexible consumption,” said Untersteller.

Dr Marcel Huber, Bavaria's Environment Minister, said: "A reliable power supply is essential now and in the future, especially for the industrial intensive southern federal states such as Bavaria and Baden-Württemberg. Fluctuating forces of nature such as sun and wind are new challenges. Since they’re only available at certain times, they have to be used intelligently. Electricity generation and consumption must be coordinated. We need a flexible power supply that remains affordable for everyone. By the summer break, the federal government must make these ideas the cornerstones of a future energy market." To realize the potential of load management, he said that Bavaria will promote its own projects at the same time.

Bavaria and Baden-Württemberg currently have a peak demand of 25 GW; industry’s needs account for about 55 to 60 per cent of the total electricity demand. Because of the nuclear phase out, there is a need for new power plants to ensure security of supply. At the same time, a portion of this need can also be covered by having industrial consumers shift their demand at certain times. Moreover, it is ever more sensible with the increasing amounts of renewable energy to displace electricity demand from times of low production from wind and solar power plants to times when there is ample wind and/or sun.

For the first time, the present study introduces the usefulness and potential of shifting the loads of large energy consumers in southern Germany. For the study, the research team examined more than 200 companies in Bavaria and Baden-Württemberg. These included both electricity-intensive industrial processes (chemical, electrical steel, paper, cement) as well as cross-section technologies (for example, ventilation, air conditioning), that are used in many industries, such as auto manufacturing and mechanical engineering. In addition, it also addresses the potential in the field of heat pumps and night heat storage.