Merit Order of Energy Storage in Germany by 2030

Workshop

Distributed Energy Resources and Storage The Czech Academy of Sciences Prague, 29th of November 2016

1 The Research Center for Energy Economics

The Research Center for Energy Economics (FfE)

• Independent institution dealing with topics related to energy technology and energy economics • Research results can be published independently from political orientations or regulations solely

based on scientific analytical methods background

• Founded • Further 1949 in training for Karlsruhe more than 300 scientists features main • Moved to Munich in • About 30 1969 theses every year

evolution • Affiliated

company: • More than 30 FfE GmbH successful since 2001 dissertations

• Members from the energy sector, industry, • Current topics: storage and grids,

science, administration and private electromobility, energy markets, energy research members efficiency

• Active exchange of experiences, • Methods: system analyses and simulations,

members involvement in a network of knowledge, data mining, GIS-models, audits 3 direct contact to scientific assistants Members of FfE e.V.

Merit Order of Energy Storage in Germany by 2030

5 Content

1 Introduction

2 Functional Energy Storage

3 Excursion: Will seasonal storage play a major role by 2030?

4 Merit Order Matrix of Energy Storage

5 Key results from MOS 2030

6 Conclusions

66 Understanding the meaning of „Merit Order“

Common Association Merit Order of Power Plants Sorting of Power Plants according to their Marginal Costs, in order to determine the short term dispatch

Generalized Understanding Merit Order sort according to value

How shall the value be assessed?

77 In Energy Economics this assessment can be done via the three goals of the energy policy triad

security of supply

competitiveness environmental protection

Welfare Business

88 Key Questions address the Welfare- and Business Perspective for the development of the Future Energy System Infrastructure

Energy System Infrastructure: power plants, grid, storage

Framework defined by e.g.: CO2-aims, RES-expansion Business point of view: revenue and contribution margin 99 Market design e.g.: regulatory framework condition, subsidies 1 From the answers of the Key Questions Changes in Market design can be deduced

Welfare / Cost-Perspective Business Perspective

Which system infrastructure is most Which system infrastructure will emerge favorable under given framework under given framework conditions from a conditions from a cost perspective for business perspective? the electricity supply system?

Energy System Infrastructure

Changes in Market design in order to unify the results of both perspectives.

Energy System Infrastructure: power plants, grid, storage

Framework defined by e.g.: CO2-aims, RES-expansion Business point of view: revenue and contribution margin 1 1010 Market design e.g.: regulatory framework condition, subsidies Storages can be found in three different sectors which are about to be interconnected more and more

1 electricity

Need for a concept which also allows for a comparison of storage technologies that work along the interfaces of the three sectors. 2 3 heat mobility

1111 The Concept of the Functional Energy Storage

70 Negative Residual-Load

60 Residual-Load

in in GW

in in GW Renewable Energies 50 CHP 40 40 Flexibile CHP Load 30 Renewable + CHP 20

Power/Load 10

Leistung/Last in GW in Leistung/Last Leistung/LastGWin

Leistung/Last in GW Leistung/Lastin

Leistung/Last in GW inLeistung/Last

Power/

0 1344 1368 1392 1416 1440 1464 1488 HourStundehour of imthe Jahr yearYear

15 All modifications of electrical demand and of primarily 10 inflexible electrical energy production applied to adjust demand and supply can be interpreted as functional energy 5 storage. 0 The difference of inflexible and flexibilized load curve equals -5 the charging and respectively decharging of the functional energy storage. -10

Storage Storage Power in GW -15 1344 1368 1392 1416 1440 1464 1488 Hour of the Year 1212 Will seasonal storage play a major role by 2030?

Weekly balance of variable production for the weatheryear 2012 Wind 2030, MOS Forschungsverbund 12 PV

10 Hydropower Forschungsverbund: ]

8 Biomass TWh

Peak load 2030: 79,5 GW [ 6 Consumption: 486 TWh Must Run

4 Energy TWh in Energie Consumption 2

There is a reduction of the overall 0 ©FfE MOS-RegMod_00758 consumption including roll out of 0 3 6 9 12 15 18 21 24 27 30 33 36 39 42 45 48 51 electromobility and heat pumps. WocheWeek des of Jahresyear yearly 24,3 TWh No need for seasonal storages Surplus max. weekly 4,8 TWh Week-to-week storages could be useful for 2 – 10 weeks per year 2030, MOS „NEP“ 12

NEP: 10

Peak load 2030: 85,3 GW ] 8 TWh

Consumption: 538 TWh [ 6

4 Energie in TWh in Energie 2 There is no reduction of the Energy overall consumption including roll 0 ©FfE MOS-RegMod_00757 0 3 6 9 12 15 18 21 24 27 30 33 36 39 42 45 48 51 out of electromobility and heat WeekWoche desof year Jahres pumps. yearly 14,2 TWh Surplus max. weekly 3,8 TWh 1313 The system and the business perspective

System Perspective Business Perspective

1414 Merit Order Matrix - Methodology

Functional Storage Energy System Stakeholders Technologies

Applications from Techno-Economic Applications from Welfare Perspective Parameters Business Perspective (1) REQUIREMENTS (1) TECHNICAL PARAMETERS (1) REQUIREMENTS

(2) DEMAND (2) POTENTIAL (2) DEMAND

(3) REFERENCE COSTS (3) COSTS (3) BENEFITS

1515 Merit Order Matrix – Structure

Explanation:

) Technology Target Corridor for Main application (economy) / Main appl. (stakeholder) Market Design

= application from Perspective economy and stakeholder perspective are compatible

= diverging application from economy and stakeholder perspective

0 CAES = compressed air energy storage HP = heat pump NSH = night storage heater

CHP = combined heat and power Stakeholders(Business

V2G = vehicle-to-grid

for

Profitability Index – PI: PI = (annual profits – an. costs) / an. costs

Profitability PI > 0  profits > costs PI = 1  profits = 2*costs 0 Added Value for the Economy (Welfare Perspective) 1616 Merit Order Matrix – Cluster Technical Data 2030 – Market Data 2012-2014 – Portfolio of Applications Pumped Storage Load-levelling / Spot market 6 500 Adaption necessary CAES (diab. & adiab.) 300 III Load-levelling / Frequency control Battery Storage Systems (Li-Ion)

No adaption necessary as already in target 100 Frequency control / Frequency control 4 corridor Home Storage Systems -100 Load-levelling / Increase of on-site consumption -5 5 15 25 Controlled Charging (min. & max. driving perform. & V2G) Load-levelling / Spot market Shifting Appliances (White Goods & Refrigeration) No adapation Load-levelling / Increase of on-site consumption 2 necessary as I little additional Shifting Power2Heat in Households (HP & NSH) value Frequency control / Frequency control Power2Heat in Households (hybrid heating syst.) II Frequency control / Frequency control 0 CHP + Heat Storage

Load-levelling / Spot market Profitability for Stakeholders for Profitability Power2Heat + Heat Storage IV Frequency control / Frequency control Adaption necessary in order to reach target Load Shifting in Industry (energy-intensive) -2 corridor Load-levelling / Industrial peak shaving -2 0 2 4 6 Load Shifting in Industry (cross-sect. technologies) Load-levelling / Industrial peak shaving Added Value for the Economy Power2Gas (H und CH ) 1717 2 4 Frequency control / Frequency control Merit Order Matrix - Uncertainties with regard to frequency control

pMRL nMRL pSRL nSRL PRL 900

800

700

/Jahr

€ 600 year

/ 500

€

payments

400 mio.

300 in in

Capacity 200

Kosten Leistungs der Kosten vorhaltung in Mio.in vorhaltung 100

©FfE 18 Regelleistung_00020 0 2008 2009 2010 2011 2012 2013 2014 2015

• From 2013 to 2014 a strong decrease in revenues für nSRL can be observed (among other reasons due to an increasing competition of Power2Heat) • PRL revenues increase since 2012 – however battery systems are already today economically viable for PRL • Uncertainties with regard to future revenues 1818

Merit Order Matrix – Cluster w.o. frequency control Pumped Storage 6 Load-levelling / Spot market 500 CAES (diab. & adiab.) Load-levelling / Spot market 300 Battery Storage Systems (Li-Ion) Load-levelling / Industrial peak shaving Target Corridor for 100 4 Market Design Home Storage Systems -100 Load-levelling / Increase of on-site consumption

-5 5 15 25 Controlled Charging (min. & max. driving perform. & V2G) Load-levelling / Spot market Shifting Appliances (White Goods & Refrigeration) 2 Load-levelling / Increase of on-site consumption Shifting Power2Heat in Households (HP & NSH) Load-levelling / Spot market Power2Heat in Households (hybrid heating syst.) Load-levelling / Spot market 0 CHP + Heat Storage

Load-levelling / Spot market Profitability for Stakeholders for Profitability Power2Heat + Heat Storage Load-levelling / Spot market Load Shifting in Industry (energy-intensive) -2 Load-levelling / Industrial peak shaving -2 0 2 4 6 Load Shifting in Industry (cross-sect. technologies) Load-levelling / Industrial peak shaving Added Value for the Economy Power2Gas (H und CH ) 1919 2 4 Load-levelling / Spot market Apart from various methodological approaches and model improvements these are the Top 5 Key Results

1 Power to heat in public and industrial district heating systems as well as flexibilisation of load in industrial processes offer the largest benefit on the transmission level from a system perspective.

2 In the study, expansion of functional energy storage reduces curtailment of up to 8 TWh.

3 Calculations show that usage of functional energy storage increases operation hours of base load power plants.

4 Advances in technology and changes in market design will guarantee system stability in the future.

5 The existing regulatory framework leads to non-negligible additional costs for the system.

2020 This graph shows the installed storage technologies w.r.t. the power and capacity for the reference scenario

6 3,0 NASA20N

5 2,5

NASA25N ]

] 4 2,0

NASA30N GWh

[

[GW 3 1,5

Power Power 2 1,0

Leistung in GWin Leistung CapacityKapazität

Capacity Kapazität in GWh in Kapazität PowerLeistung 1 0,5

©FfE MOS_00518 0 0,0 NightFlexibilisierung Storage ThermalThermische DSMDSM – energystrom- DSMDSM Querschnitts- – cross Power2HeatPower2Heat Power2HeatPower2Heat HeaterNacht- StorageSpeicher intensiveintensive Industrie technologiensectional publicöffentliche district industrialIndustrie speicherheizungen Versorgungheating district heating

Conclusion:

. DSM is used with total available capacity . The total amount of power2heat increases every year

2121 Influence of grid scenario on storage demand

Conclusion: Stronger Grid 6.000 NASA25N . Only if grid restrictions are 5.000 NASA30N taken into account a flexibilization of night storage

NBSA25N 4.000 heaters is of use in 2030 NBSA30N 3.000 NASA30K . Independent of the scenario Power Power [MW] 2.000

Leistung in MW in Leistung the DSM potential is always used to it‘s maximum 1.000

storageSpeichertyp type

2222 Apart from various methodological approaches and model improvements these are the Top 5 Key Results

2 In the study, expansion of functional energy storage reduces curtailment of up to 8 TWh.

3 Calculations show that usage of functional energy storage increases operation hours of base load power plants.

4 Advances in technology and changes in market design will guarantee system stability in the future.

5 The existing regulatory framework leads to non-negligible additional costs for the system.

2323 Taxes and fees influence the overall system costs

Taxes and fees depending on the scenario 350 350

Pumped hydro /a € Scenario Power2Heat€ 300 year 300

storage / € 250 250

H 2,85 €/MWh 113,66 €/MWh in in Mio. 200 200

H* 2,85 €/MWh 26,26 €/MWh costs 150 150 S1 10,89 €/MWh 26,26 €/MWh

100 100

system

S2 35,89 €/MWh 26,2650 €/MWh 50

Added

Mehrkosten im System in Mio. Mio. in System im Mehrkosten Mehrkosten im System in Mio. Mio. in System im Mehrkosten 0 0 V2 H V2 H* V3V2 H H V3V2 H* H* V3V3 S1 H V3V3 S2 H* V3 S1 V3 S2

Conclusion:

. Potential for cost saving is in the same magnituded as in the frequency control marekts

. In comparison to the costs of grid expansion and the EEG-fee the extra costs are very low

2424 Taxes and Fees reduce the commitment of PHS and P2H. At the same time NSH and HP are flexibilised.

Taxes and fees depending on the scenario

Pumped hydro Scenario Power2Heat storage

H 2,85 €/MWh 113,66 €/MWh

H* 2,85 €/MWh 26,26 €/MWh

S1 10,89 €/MWh 26,26 €/MWh

S2 35,89 €/MWh 26,26 €/MWh 2.000

1.500 V3 S1 in h in

V3 S2 hours

1.000

load

500 Full

Vollbenutzungsstunden in h in Vollbenutzungsstunden 0 PumpspeicherPumped FlexibilisierungHeat FlexibilisierungNight ThermischeThermal DSMDSM – DSMDSM – Power2HeatPower2Heat Power2HeatPower2Heat (Bestand)Hydro Wärme-Pumps StorageNacht- SpeicherStorage stromintensiveenergy Querschnitts-cross publicöffentliche district Industrieindustrial 2525 Storage pumpen speicher-Heater Industrieintensive technologien sectional Versorgungheating district heating (stock) heizungen Conclusions for 2030

Overall statement

 The need for energy storage is not only technically driven, but also economically and - in the long run - ecologically

Energy storage will play a major role in:

 lowering system costs  Integration of more renewables into the energy system

 lowering CO2-Emissions on the long run

Energy storage will play a minor role in:

 Security of supply

Recommendations

 attractive business cases for the use of Power2Heat needed  Further improvements in market design like shorter lead times and block trade lengths  Identification of flexibility potentials e.g. by learning flexibility networks  Merit Order of storage, grid expansion, efficiency and renewables 2626 Thank you for your attention and the support of

contact: Christoph Pellinger [email protected] +49-89-158121-70 2727 Download of the study: https://www.ffe.de/die-themen/speicher-und-netze/414