What Lessons From Germany and Denmark? [3]

German energy policy has evolved scrappily, with unintended consequences aplenty.  In particular it was (presumably) not foreseen that the very large amount of subsidised solar electricity-generation capacity would seriously distort the wholesale electricity market.  This is greatly to the detriment of unsubsidised gas-fired power stations which would expect to make their money providing peak power during the middle part of the day, at prices commanding a premium over baseload (24/7) prices - a premium that has been substantially eroded by solar.

This situation could probably be sustainable if it were the end of the story.  In logistical terms, after all, it is not fundamentally problematic to introduce a source of electricity that peaks at roughly the same time as demand (midday, in Germany's case).  Unfortunately for German electricity consumers it is only the start of the tale.  For on top of the solar capacity is another large new tranche of renewables - wind power.  This is similarly subsidised and has a marginal cost close to zero.  But far from having the predictable output of solar, it is of course subject to the vagaries of the wind.  It has a similar distorting impact on the wholesale market as solar, but at essentially random times, creating a radically unstable market dynamic.

The purely physical aspects of the system problems caused by intermittent wind generation can generally be resolved with a combination of good engineering and operational practices, and enough money - provided the challenge is on a sufficiently limited scale.  However, in Germany these problems are on a large and growing scale, and the patchwork of solutions available to grid operators is not robust.

It is fairly self-evident that a situation like this requires, inter alia, a lot of flexible power sources.   The best solution is generally to access hydro-electricity.  With sufficient quantities of water stored at the top of a hydro facility, it can respond literally in seconds when called upon to back up some deficiency in supply at short notice - the Danish solution (using Norwegian hydro).

Where, as in Germany, there is inadequate availability of hydro power, gas-fired plant is the obvious second-choice.  It is not as flexible as hydro, but can nevertheless provide a useful contribution to flexibility requirements, albeit at sub-optimal efficiencies.

However, a market-based approach to bringing on flexible resources requires appropriate price-signals.  As we have seen, for much of the time solar power undermines the key price signal, namely the premium of peak price over baseload price, by dint of which it is exactly gas-fired plant that has been rendered uneconomic.  At the time of writing most German gas-fired plant lies idle; and no-one is building any more.

Imports from neighbouring countries therefore feature significantly in balancing the German grid - including hydro from Norway and Switzerland, when available, but predominantly nuclear (France), hard coal and lignite (Poland and the Czech Republic).  We have noted the ironies before.

(Confusingly, Germany also sometimes exports power; and inevitably this is at times of wind and solar surges.  Greens make great play of this, sometimes asserting it proves German energy policy is a roaring success.   But total capacity was never the issue: it is achieving an efficient and reliable balance in the system at all times between naturally variable demand, and increasingly unpredictable supply.)

So if gas is uneconomic, and nuclear is being phased out, where will Germany source its reliable power ? Another key component in the mix (and another irony) is the large-scale building of new coal and lignite (brown coal) power plants within Germany itself.  The ever-growing policy-driven renewables capacity seemingly cannot be halted: but at least the large German coal- and lignite-mining industries can support a new generation of highly efficient fossil-fuel plant.  The cost of CO2-burning permits is at rock-bottom; coal is cheaper than gas and is still economic to burn; and a new plant operates at much greater efficiency and significantly lower emissions than the old coal-fired plant it replaces.  Unfortunately it offers less flexibility than gas, but can make a contribution to this requirement also.

How much pleasure is derived by greens from the large programme of newbuild coal plants is anyone's guess; but it is how practical German power engineers are attempting to square the circle.

There is no guarantee they will succeed.  The final piece in this series will consider the effects and the costs of dysfunctional German energy policy - and a warning to the rest of us.    

READ ON:
PART FOUR (CONCLUSION)

PREVIOUS:
PART ONE
PART TWO


Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog; or for unintentional error and inaccuracy. The blog author may have, or intend to change, a personal position in any stock or other kind of investment mentioned.

Nick Drew: "Green" initiatives have contradictory effects

See our energy expert's latest squib here.

Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog; or for unintentional error and inaccuracy. The blog author may have, or intend to change, a personal position in any stock or other kind of investment mentioned.

Nick Drew: "Green" initiatives have contradictory effects

See our energy expert's latest squib here.

Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog; or for unintentional error and inaccuracy. The blog author may have, or intend to change, a personal position in any stock or other kind of investment mentioned.

The Only Solution Is My Solution

The following Grauniad headline gets my prize for best of 2013 so far:

Rogue geoengineering could 'hijack' world's climate

"The deployment of independent, large-scale "geoengineering" techniques aimed at averting dangerous warming warrants more research because it could lead to an international crisis with unpredictable costs to agriculture, infrastructure and global stability, said the Geneva-based WEF in its annual Global Risks report"

Haha ! They don't like it up 'em, Captain Mainwaring. But aside from 'independent' not fitting with 'dictated by the green lobby', what exactly is the problem ? Let's turn to the report:

"A long series of ethical, legal and scientific questions quickly arises about countless knock-on effects that might be much more difficult to assess ... Almost any change in weather and climate patterns is likely to create winners and losers, but determining causation and quantifying impacts on any given region or country would be a massive challenge."

What, unintended consequences ? Well, b****r me ! That would be like, err, when you subsidise biofuels and discover that entire forests are being felled, and food-stocks diverted, for use as fuel ? Or when you subsidise solar power and find that your electricity grid can't cope ? Or when you implement 'green' policies and find that your CO2 emissions are rising ?

"Determining causation and quantifying impacts would be a massive challenge" !!   Are they reading what they are writing ?  


This piece first appeared on Capitalists@Work

Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog; or for unintentional error and inaccuracy. The blog author may have, or intend to change, a personal position in any stock or other kind of investment mentioned.

Ancient underground city in Turkey!

Seen on Nourishing Obscurity: a fantastic, multi-level underground city that housed up to 10,000 people in siege times, a thousand years ago. Discovered only in 1963, when a Turkish man demolished an interior wall in his dwelling. Don't miss it!

Part 1
Part 2

Green energy, black lungs

See the Energy Page for the dark side of "heat from waste".

Green energy, black lungs

See the Energy Page on the dark side of "heat from waste".