Uniper’s CEO Andreas Schierenbeck said Germany needs a consensus on how to ensure future supply security. “Until that is clear, nobody will construct power plants.”
Several mechanisms are under discussion to “optimise the energy-only-market” such as auctions for a “strategic capacity reserve”, a focused or comprehensive capacity market, or simple direct payments to operators per installed capacity they keep in standby mode. In contrast to an energy-only-market, in which operators are paid for the kilowatt-hour they produce, in the capacity market they receive remuneration for the capacity they keep ready for certain situations.
The government, eager to advance its Energiewende policy, concedes that natural gas will play an important role as a bridge fuel. Coal use fell significantly in 2019, while power generation from gas increased 11 percent compared to the previous year. But due to high operating costs, gas-fired power plants are often pushed down the merit order and throttle production, especially when there is a lot of renewable electricity available.
In fact, Germany’s gas power plant tend to produce less than 30 percent of the electricity they could have generated had they run at full power all year. This rare dispatch undermines their business model and affects German power plant operators and manufacturers alike.
Growing need for backup capacity
With the continued electrification of transport, buildings and industry, there is a growing need for reliable backup generation at times of high power demand and when wind and sun are in short supply.
“Today, on a cold, dark winter day, the loads created in heating are about five to six times the peak loads of the power system,” said Timm Kehler, head of Zukunft ERDGAS.
Gas power units can be ramped up and down comparatively quickly, meaning they could be a good partner for fluctuating renewables. Some see it as a “bridge technology” for the energy transition. Battery storage technology can partly be used to balance out the variations in power feed-in.