German industry earns cash from green energy upheaval

Big potential seen if better rules are written

FRANKFURT, Oct 19, (RTRS): German industry is learning how to profit from the upheaval and costs of the country’s shift towards solar and wind energy.

Greater reliance on renewables in Europe’s biggest power market is making the peaks and troughs of electricity production bigger and less predictable, as the wind picks up or drops and the sun shines or disappears behind the clouds.

Power firms have therefore enlisted the help of big consumers such as metals, paper and chemical companies to deal with the problem of matching volatile supply to demand.

By upgrading their plants or making relatively small changes to their operations, growing numbers of manufacturers are taking more power at times of excess capacity and less when supplies are tight.

In exchange for this flexibility, the manufacturers get breaks on their power bills. Neither the suppliers nor the consumers will reveal how big the discounts are, with each deal negotiated individually, but the need for thrift is great.

Industry consumes half of all power in Germany and pays roughly twice the price of US rivals, mainly due to higher labour and infrastructure overheads and a lack of shale gas, which in the United States has sharply cut generating costs.

“End consumers that were up to now mostly passive can become active in the energy market and receive money for their flexibility,” said Thomas Schulz, cofounder of Entelios.

Entelios and Denmark’s Dong Energy A/S, are among the companies vie for the business of helping manufacturers to earn rebates on their power bills.

Germany’s move towards renewable energy accelerated in 2011 when the government decided to phase out nuclear generation after the Fukushima disaster in Japan. Driven by green-energy targets and incentives, renewables now account for nearly half Germany’s installed power capacity of over 185 gigawatts (GW).

But they contribute only a quarter of the actual power supply because wind and solar units operate only between a fifth and a third of the time, while conventional nuclear and fossil fuel plants can produce electricity around the clock.

An expansion of the national grid’s capacity will help to match supply and demand, and overcome the problem that most wind energy is produced in the coastal areas of northern Germany while much of the power hungry industries are far to the south.

But this will take time and be costly, so the utilities need manufacturers to turn their production up and down more according to how much energy is available from sources that depend of the weather. Utilities already use backstop plants, typically natural-gas powered, which start generating when other sources cannot meet demand. But as the number of wind and solar units grows, other power cushions are needed.

So-called Demand Response (DR) or Demand Side Management (DSM) schemes, pioneered in the United States, can ease the problem by flattening demand when supply is low while absorbing and distributing oversupply at other times.

Among the companies involved in such schemes is SGL , which is based in the Bavarian town of Meitingen.

An expert in working with extreme temperatures, SGL makes graphite electrodes that need to be heated to 3,000 degrees Celsius (5,400 Fahrenheit) to become electrically conductive. They then become components in scrap metal recycling furnaces.

One day before an oven loaded with unfinished electrodes is scheduled to be taken up to its maximum temperature, SGL lets the utility use the oven as an outlet for unexpected power supply peaks. These last for about 30-90 minutes and are typically solar-powered.

“When the weather forecast was cloudy for the day and the sun comes out anyway, that’s when I can safely assume that LEW uses the oven,” said Diana Windeler, SGL head of graphitisation.

The oven is partly heated up using excess energy one day, meaning SGL needs less electricity to reach the full temperature the following day, when overall power supplies may be tighter.

Windeler said the rebates SGL gets from LEW more than compensate for the organisational complications.

At aluminium maker Trimet, another DSM pioneer, energy accounts for 40 percent of total production costs. Its annual power bill is 300 million euros ($385 million) in Germany alone.

Trimet has upgraded its plant in Hamburg to raise or lower power consumption by 30 megawatts (MW) within seconds, equal to about half a dozen large offshore wind turbines at full speed.

Pricing in the German power market was largely formulated when fossil fuel and nuclear dominated generating capacity, and Trimet says it is being penalised for temporarily pushing up consumption to accommodate a moment of oversupply.

The company wants to persuade regulators to remove certain fees based on peak demand. However, it is already testing technology that could make its power use even more flexible, with the first results expected at the end of the year.

If DR schemes develop out of their current niche, they could create a buffer equal to two big nuclear power stations or 3 percent of peak demand by 2020, according to German energy efficiency think tank Dena.

Entelios, the German unit of US firm EnerNOC that provides DSM software, hardware and advice, says the long-term potential could even be up to 10 percent of peak demand. But Schulz said better rules governing metering systems, software and tariffs are needed.