Winter poses major challenges to the energy supply in Germany
In order to guarantee supply and ensure grid stability, the last three nuclear power plants will remain on the grid, and lignite-fired power plants will be brought back to the market. Transmission system operators have set up contingency measures, reviewed available instruments and expanded reserves. To avoid brownouts and blackouts, the impression has been given that all conceivable measures are being used, and a full range of potential is being mobilized. But this impression is deceptive.
One proven instrument remains unutilized: regulating the use of industrial loads, which enables power to be taken off the grid completely in less than a second or within 15 minutes. From 2014 to mid-2022, transmission system operators used this load flexibility 452 times.
The instrument was regulated in the “Ordinance on Agreements on Disconnectable Loads”. This ordinance expired on July 1, 2022. An extension did not come about because it was claimed that the ordinance contradicts EU laws on state aid. It is worth noting that France and Italy have similar regulations that are still in effect. Apparently, there are no conflicts with EU law in these countries. Both countries expanded the instrument after a drastic frequency drop to 49.74 hertz in Western Europe on January 8, 2021 was intercepted with 1.7 gigawatts of disconnectable loads in Italy and France, among other things. In the event of a further drop in frequency in the European grid, additional disconnectable loads amounting to almost 1.5 gigawatts were available in Germany at that time.
Unlike France and Italy, Germany went in the opposite direction. It refrained from reforming the existing regulation on disconnectable loads in a timely manner or creating a new regulation. A replacement instrument is now intended to close the gap. This “real-time system service product of disconnectable loads” (SEAL) is to be formulated as a voluntary commitment (FSV) on the part of transmission system operators. However, the SEAL commitment is not expected to be adopted before June 2023. For industrial companies, this means even less reliability in an already challenging situation. They face unregulated power cuts without compensation, carried out as a shutdown cascade in accordance with Art. 13.2 of the Energy Industry Act. Emergency measures of this kind result in high costs for the companies and can also lead to damage in production facilities.
It is in the public interest to avoid these unregulated shutdowns.
A future long-term regulation should be designed to respond to market needs so that more plant operators can be motivated to offer industrial flexibilities. For example, the energy price could be based on the price of intraday trading during the period in which the system is at risk. This would ensure that the required energy is procured at fair market conditions. The capacity price, which covers the increased costs of constraints due to availability reports, should also be adjusted. A future-proof, stable regulation must also offer the providers of industrial flexibilities perspective and planning security. To this end, it is necessary to appropriately dimension the quantity tendered. For not only this winter, but also after the final decommissioning of nuclear and coal-fired power plants, it will be absolutely essential that a power supply based on renewable energy sources incorporates industrial load flexibilities.
Author: Svetlina Ilieva-König, Energy Expert, Public Affairs at TRIMET Aluminium SE