Tearing down the walls - wir bringen Australische Energie nach Berlin!

Today was the third and penultimate day of our Energy industry delegation trip to Berlin. Over the last two days I have learnt so much - its been a whirlwind. I plan to do a bit more of a formal write up after we wrap things up tomorrow.

In the meantime, I wanted to share some things we learnt today from our tour of the EUREF campus.

And for those of you who don't recognise the three middle aged white guys in the photo, that's myself from the CEC, with Dom Adams from the Energy Networks Australia and Ben Skinner from the Australian Energy Council. Breaking down the walls between the energy peak bodies was how Ben described this photo.

Today our industry delegation visited the EUREF campus. EUREF is a privately run innovation hub, where leaders in the transition explore theoretical and practical approaches to the Energiewende. We began with a briefing from the German Renewable Energy foundation - the Bundesverband Erneuerbare Energien (BEE). BEE has commissioned some excellent analysis exploring the economics of investment in renewables.

We then did a tour of the remarkable applied examples of energy innovation being developed at the EUREF campus. If applied stuff appeals to you more than abstract market design, then please skip ahead to part 2!

Part 1: BEE study of grid and market flexibility

The BEE study explored an issue familiar to many in the renewables sector in Australia - namely, the wholesale price suppression that occurs in energy only markets where there is a need for significant investment in renewables to meet emissions reductions targets.

As in Australia, in Germany the combination of the inflexible mingen limits of thermal coal units, coupled with the potential for renewable energy super-availabilities, can result in significant wholesale price suppression.

Now, while low wholesale prices are great for consumers in the short term, if they remain too low for too long, investment signals for renewable investment are muted. This can result in an unstable investment pipeline, as investors delay building new renewable generation and storage. In an environment where coal generating units are being removed and are increasingly prone to catastrophic failure, this leads to increased risk of sudden wholesale price spikes, and even reliability issues.

The below figure, reproduced from the BEE website, demonstrates how wholesale prices, and therefore renewable revenues, have decreased consistently as renewable volumes have increased.

Source: BEE website

This can reduce investment efficiency. In Germany, it could cause significant issues in terms of actually delivering a steady pipelines of renewable investment. This will conflict with the hard commitment from the German Government to a 80%-90% reduction in greenhouse gas emissions by 2050, which will largely be driven by massive scale up of renewable technologies.

The solution proposed by the BEE study is to focus on increased flexibility across the entire energy system of systems, both physical and financial. This recognises that an increasingly variable energy supply in a renewables dominant system must be matched with increasingly flexible demand. Increasing this flexibility results in better balancing of the two sides of the market, reducing the extent of negative pricing and therefore increasing the overall efficiency of the market.

Its proposed that these 'flexibilities' can be implemented in different ways. Physically, flexible demand must be encouraged, particularly through the efficient co-location of flexible loads such as electrolysers with variable renewable resources. This is proposed as a key way to avoid the occurrence of negative prices, as well as reducing the need for extensive transmission build.

Encouraging the use of 'power to heat' also offers unique opportunities in Germany (with its long, cold winters and highly centralised heating loads). This relatively flexible technology allows for low cost renewable electricity to be soaked up during periods of excess (by heating or cooling thermal mass in massive water tanks), and then used for space cooling or heating at later points in time.

What I found particularly interesting though, was the suggestion of 'flexing' the subsidies that are currently used to support renewable investment, to reduce the extent of negative pricing. In Germany, these subsidies are paid through the 'EEG', which is a firm of feed in tariff that is made available to renewable generators to stabilise their revenues (it works a little like a cross between a CFD and a classic feed in tariff - I'll try and write a bit more about it in a later post). The EEG has a fixed payout period of 20 years, however there are still likely to be periods of negative pricing in that 20 years, which serves as a disincentive to investment.

It is therefore proposed to 'flex' the tenor of these EEG feed in tariff contracts, effectively extending their total life by a year or two and allowing generators to earn more feed in tariffs across those out years, in return for the generators facing some temporary reductions in the feed in during periods of (otherwise) negative prices.

Finally, the study proposed an alternative view as to the best source of flexible generation. Other studies have proposed converting existing gas (and in some cases coal) power stations to run on hydrogen as a source of dispatchable generation. Noting the extensive capex and fuel costs of these solutions, the BEE study proposes that various forms of biofuel generation might form a better zero carbon alternative for firming capacity.

All in all I found this study provided some useful insights as to how an energy only market might be adapted to maintain effective investment signals in renewables. Efficient co-location and support for a highly flexible demand side are obviously translatable solutions to the Australian context. What was most interesting for me was the example of how ex-market subsidies can be carefully adapted and tailored to minimise distortionary impacts on energy market function. This is something that should be carefully fed into considerations of capacity market alternatives, such as a storage target or reserve capacity mechanisms.

Part 2: EUREF campus tour

The EUREF campus is an innovation hub where clever firms like BEE work alongside applied engineers who are exploring practical ways to transition the German economy to zero carbon.

The first port of call was a cogen plant - a combined heat and power (CHP) plant. The picture below shows a generating unit - unfortunately I didn't get the capacity but I think it was around a MW - coupled with a heat exchanger. The generator is 'fuelled' with biomethane - it actually runs on natural gas from the reticulated network, but there is a contract type arrangement based on an agreed upstream injection of biomethane into the general natural gas supply.

The generator supplies power to the rest of the campus, and the heat it produces is stored in several water tanks, shown below. The water stored in these 20,000 litre tanks is then used to either heat or cool the rest of the campus.

Cooling is provided through heat exchangers that run off the electricity generated by the biomethane gas turbine, as shown below. During summer these exchangers chill the water in the tank, to cool the rest of the campus buildings. They were buzzing away while we were there, in the warm Berlin early autumn.

One of the coolest things in the whole tour though was what came next. The pictures below are of 'retired' Lithium batteries removed from Audi EVs, after the battery had hit a designated lifetime. These batteries have been installed in parallel and linked to the local grid, to provide balancing services. No-one quite knows exactly how long they will last until their recharge capacity is completely exhausted - the entire installation is being used by Renault as a trial to see how long these batteries can be repurposed and used in this way. Its a great way of increasing the efficient utilisation of batteries, and forms a useful and productive next alternative to full recycling.

This combined heat and power installation offers an excellent insight into how Germany is chipping away at the transition. The district space heating and cooling solutions being explored here can be easily and practically applied in existing residential and commercial premises. They are also zero carbon, or very close to. They are highly flexible, and so offer a natural demand side complement to the supply side variability of renewables. Finally, they are also lower cost than traditional forms of space heating and cooling, particularly oil heating.

We also had a look at some hydrogen fuel cell and EVs, including the below - the words printed on the back roughly translate to 'Only water comes out here', as fuel cell usage produces only water vapour as a by product.

Then there was this beauty (the car, not Ben !!). The Porsche Taycan Turbo, capable of 0-100Kms in 2.8 seconds. Posted here not so much because of its enviro credentials, but more because I want one.

There were so many other gems to see - more than I can possibly share, but a few highlights:

This 5 Kw micro windturbine, which has already been installed on multiple rooftops in nearby neighbourhoods.

This 'PV shade roof', which was covering the EV charging area, with thin film PV on a transparent backing.

This single cell recharging station designed for festivals and other outdoor events, which can be used to charge EV bike batteries and phones, made from an end of life PV cell as an alternative to going into landfill or recycling.

And finally this hydrogen powered BBQ.

Just kidding, its actually propane...but a nerd can dream...

All in all - what a day! We learned so much, and really got an insight into how Germans are just getting on with the job of decarbonising, rather than dissolving into ten years of culture war histrionics.

Anyway...hope this was interesting for some of you! There have been a lot of other things we have learned, but I'm waiting on final slides so I know what I can share. Will try and do more write ups in the coming days.

'abends for now!