Auction rules threaten to stifle wind innovation

GERMANY: The German government's insistence that renewable-energy projects must deliver all their electricity into the wholesale market to qualify for support risks cutting off some of the more innovative uses of wind power currently under development.

German turbine manufacturer Enercon is right in the front line of market players developing and testing new approaches and systems for the Energiewende, the transition from fossil fuels and nuclear to largely renewables-based energy generation.

The company provides cheap green electricity for its employees, as well as wind power for local industries and power-to-gas systems. It also has pilot projects testing wind-generated electricity storage.

All the more frustrating, then, that the German government is planning a revision of the Renewable Energy Act, known as EEG, focused so much on the needs of competitive auctions for setting support that such innovation in wind generation will be strangled.

Wind-based flexibility solutions developed by companies to secure early-mover rewards may have been in vain if paragraph 27a of the new draft EEG 2016 is not amended.

This currently says that all new wind and renewables projects that win support in auctions from 2017 must deliver all their electricity "into the public supply network", apart from when electricity prices are negative to cover transmission network losses or for technical ancillary services, such as warning lights.

In practice, the electricity will be sold in the wholesale or balancing power markets.

Electricity trading

Enercon has made considerable strides in the European wholesale electricity market through Quadra Energy, a subsidiary founded in 2012. This now markets nearly 3GW of wind and renewables capacity, placing it among Germany's top-ten renewables-electricity trading companies.

Quadra Energy has signed up wind projects using mainly Enercon turbines to bring their electricity to market. Of the total capacity, 2,710MW comes from onshore wind, around 29MW from solar PV, 2.5MW from hydro, and 3.6MW is sourced from small, unit-type combined heat and power generation units.

Quadra provides these electricity trading services and products to wind farm owners as an "energy logistics" add-on to Enercon's wind-turbine maintenance and services package, known as the Enercon partner concept or by its German acronym, EPK.

Wind-farm customers signing up to this "EPK+E" package can choose various options. These include marketing their wind generation on the day-ahead spot market - obligatory in Germany for all new turbines brought into operation since April 2014, but optional for older machines.

In future, wind generation can also be sold on the balancing power market, where generation is curtailed or called up when necessary to keep the transmission network stable.

EPK+E also helps operators with reporting obligations required under the EU's Regulation on Wholesale Energy Market Integrity and Transparency (REMIT), which aims to combat energy market manipulation.

Finally, wind-farm owners can also sign up for a green-electricity product from Enercon Erneuerbare Energie, founded in 2014 as a partner company to Enercon. This covers the electricity that turbines have to take from the transmission network to ensure systems keep running when there's no wind.

This so-called "turbine own consumption" product is a mix of 15% wind and 85% hydro generation, so operators using the product can state that in addition to producing green power, they also use green power on windless days, points out the company. The product is officially certified as "green", and Enercon expects this business to expand in coming years.

Quadra also provides a 100% green electricity product made up of electricity from Enercon turbines and German hydropower which is marketed to Enercon employees by Enercon Erneuerbare Energie.

The price to Enercon employees in Germany was reduced at the beginning of 2016 to as little as EUR0.22/kWh, depending on the region, plus a monthly standing charge of EUR7.5, including value added tax (VAT).

An average household using 3,500kWh a year would pay from EUR859 for the Enercon product, compared with a German average in 2015 of EUR1,008, in both cases including all taxes.

"Employees pay less for their power, at the same time making their contribution to the energy transition in their own homes," Enercon said.

So far, so good. Trading wind and renewables electricity within the wholesale market and supplying green electricity products is working well. But what if wind companies like Enercon want to go further and contribute to solving problems that are holding back wind energy growth?

Alternative uses

Germany is battling with transmission network bottlenecks, particularly from the windier north to the south of the country. The government argues that wind-generation growth must be held back until transmission-network expansion has caught up.

The wind sector is keen to develop projects using wind-generated electricity "before the grid" so that in very windy periods, feed-in to the grid may have to be curtailed, but not actual electricity generation. The electricity would be used rather than wasted.

Other wind players want to take advantage of the low prices when the wind is blowing strongly, for example to use or store their wind-generated electricity locally, or use it for industrial processes.

It can be used to power electrolysis systems for hydrogen production and, in a second stage, methane, which could be utilised as fuel for small local small gas-fired electricity-generation plants in windless periods, for example.

Enercon has a pilot project under way to optimise power supply for its GZO foundry near its headquarters in north-west Germany, by dovetailing generation from the Enercon E101 3MW turbine located on foundry property. The foundry has annual electricity consumption of some 40GWh a year and a peak load of 10-12MW.

In a next step, at its Aero Ems blade factory at Haren, Enercon is working on combining wind-generated electricity with a 4MW power-to-gas electrolysis plant and a 4MW battery-storage system.

Wind generation with storage is another big development. The Feldheim regional regulating power station (RRKW) project - comprising a 10MW lithium-ion battery storage system with 10.8MWh storage capacity, supplied by LG Chem, and 42 wind turbines, mostly Enercon machines - is currently the largest in Europe, notes Enercon.

The project partners, developer Energiequelle and Enercon, commissioned the system in September 2015. The battery storage capability is marketed by Vattenfall as so-called primary reserve in the load-balancing power market.

Spanner in the works

Enercon is justifiably enthusiastic over the range of its developments, which include a clutch of system-control capabilities packed into a single "smart container" for charging stations for electric vehicles, battery storage systems, static synchronous compensator (Statcom) converters and power-to-gas systems. But the German government has tossed a spanner in the works that threatens to bring such innovation to a standstill.

The draft Renewable Energy Act 2016, which the government hopes to pass before the summer break starts on 13 July, says that as a condition of support allocation, all electricity from new wind-energy projects must be channelled directly into the transmission network for public supply. Even temporary storage in a battery appears to be almost completely ruled out.

"If implemented, article 27a in the draft EEG 2016 would be a serious blow for all those undertaking flexible energy concepts for better integration of wind and renewables electricity into the energy system," warned Florian Valentin, expert for renewable energies at lawyers Von Bredow Valentin Herz.

"If, for instance, any wind power-to-X transformation takes place, support for electricity from the wind farm is cancelled for the whole calender year," he said.

The draft law may aim to create a level playing field where all bidders in the auction system compete under the same terms by dictating that all successful projects have to feed their electricity into the public supply grid. Otherwise bidders with concepts where some or all of the generation is destined for their own consumption could otherwise have an advantage.

"But the impact goes too far," said Valentin. "In ensuring all the electricity is fed into the public grid, the rule aims for complete control of wind and renewables generation. But the negative impact on wind and renewables concepts for flexibility is huge," he warned.

No wonder then, that Enercon's managing director, Hans-Dieter Kettwig, was sceptical at the Hanover Industry Trade Fair in April 2016 that the company's smart solutions would find a market before 2020.