Christian Schneller E.ON Netz GmbH, Bayreuth / Germany

The German Wind Power Experience – Integrating large Intermittent Generation Capacities in theElectricity Market

Christian SchnellerE.ON Netz GmbH, Bayreuth / Germany

Seite 2Wind Power Integration Christian Schneller, E.ON Netz GmbH

I. Facts & Figures

II. Operational Challenges

III. Economic & Legal Challenges

IV.Conclusions

Agenda


Wind Power Capacity

57,000

75,000

inst. cap. [in MW]

Sources: dena, EWEA

onshore

offshore

10,000

70,000

202020102007

22,09630,000

48,000

2010 20202006

180,000

Germany Europe


Wind Power Geography

Germany 22,096 MW

E.ON Netz8,687 MW

40 % 17 %

D

EU 27 56,535 MW

Sources: EWEA, ISET

as of Dec 31, 2007


E.ON Netz`s Perspective

In 2007 renewables accounted for…

70% of E.ON Netz`s „revenues“

> 150.000 generators in E.ON`s grid zone

20% of gross power consumption within E.ON`s grid zone

> 500 km new eHV lines currently in authorization procedures

380 kV-LinesRenewables have become a significant operational and

economic factor.


I. Facts & Figures



IV.Conclusions

Agenda


The wind blows wherever it pleases.

You hear its sound, but you cannot tell

where it comes from or where it is going.John

3,8


1st Challenge: Limited Availability…

0,0

5,0

10,0

15,0

20,0

25,0

30,0

35,0

Prop

ortion

of w

ind

pow

er in

grid

peak

load

in %

in 2

006

Jan Feb Mar AprilMayJuneJuly Aug Sept Oct NovDec

Back-up Capacity

The wind blows when

it wants.

“Wind Refinement

“

+


… requires sufficient Back-up Generation.

Wind power feed-in 2007 in E.ON grid: 26 MW - 7569 MW

„Capacity credit“ of German wind turbines: 8 % (2006) -> 5 % (2020)

Sufficient incentives for back-up generation?

From NIMBY to BANANA?

Back-up Capacity

“Refinement”

Who is responsible for “refinement”?


2nd Challenge: Limited Predictability…

Balancing Power

It is hard to tell when the wind will be

blowing

Example E.ON control area

Forecast Tools

+0

500

1000

1500

2000

2500

3000

3500

00:00 h 03:00 h 06:00 h 09:00 h 12:00 h 15:00 h 18:00 h 21:00 h 00:00 h

feed-i

n [

MW

]

forecast

wind energy feed-in

+ 2130 MW


E.ON

Netz

P1

(t)

Pn(t)

Transformation

Pges= ΣaiPi + biPi2

+ ...

P(t

)

Backup… requires reliable Forecast Tools & Balancing Power.

Balancing Power

Forecast of Wind Speed & Direction

Forecast error and gradients rise with capacity

Will there be sufficient fast reacting generation units?


3rd Challenge: Different Location of Wind & Demand…

< 4 m/s

4 – 5 m/s

> 5 m/s

Grid Expansion

The wind blows where it wants

“Traffic Regulation”

+


…requires „traffic regulation“…

Priority Rules1. RES-E 2. CHP-E 3. New conventional plants 4. „The rest“

Generation ManagementTempory feed-in restrictions in case of 100% RES-E

Locational Signals Generators in Germany enjoy free access to the grid.RES-E producers get compensation payments for feed-in restrictions !!!

Technology SolutionsTemperature Monitoring & „hot cables“


… and Grid Expansion.

Source: dena grid study 2005

How to synchronize RES &

Infrastructure Development?

Overhead Lines or Underground

Cables?

Up to 2.700 km new/enforced eHV lines needed by 2020

8 years for authorization on average!


I. Facts & Figures



IV.Conclusions

Agenda


RES Promotion: Effectiveness vs. Efficiency

Give Marketing & “Refinement” Responsibility to Generators

I. Feed-in System: „take & pay“ (and refinement) obligation for grid operators – guaranteed demand & fixed price for the generator

High investment safety but RES-E generators stay immatureII. Green Certificates: price & marketing (and refinement) risk for the generator

More efficiency oriented but risk premium increases RES-E subsidies

III. Bonus System: marketing risk & refinement responsibility on the generator, limited price risk

Possible compromise solution / 1st step towards market integration


RES-E Integration is a European Task (I)

INERNAL ELEMENTS

TIE LINES

P.

SK

FRY

CH

BA

MK

PL

FR

DK

HUAT

SI

GR

BG

D

FRY

AL

RO

PL

PT ES

FR

DK

HU

NL

SI HR

GR

BGIT

D

BE

CZ

P.

SK

FRY

CH

BA

MK

PL

FR

DK

HUAT

SI

GR

BG

D

FRY

AL

RO

PL

PT ES

FR

DK

HU

NL

SI HR

GR

BGIT

D

BE

CZopera

tionall

y

Seite 18Wind Power Integration Christian Schneller, E.ON Netz GmbHSource: EWEA

UK2.389

Ireland805

Germany22.247

France2.454

Spain15.145

Portugal2.150

Italy2.726

Croatia17

Turkey146

Romania8

Greece871

Poland276

Czech Rep.116

Austria982Switzerland

12

Luxembourg35

Netherlands1.746

Belgium287

Denmark3.125

Norway333

Sweden788

Finland110

Lithuania50

Latvia27

Estonia 58

Slovakia6

Bulgaria70

Hungary65

Ukraine89

Wind Power in 2007EU: 56.535 MWTotal Europe: 57.136 MW

econom

icall

y

RES-E Integration is a European Task (II)


On March 13th, 2001 the ECJ ruled: The German renewables act hinders trade

in electricity and discriminates against foreign market participants; it is yet compatible with the EC Treaty at the „current state of community law“.

What would be the Court`s position as of September 16th, 2008?

RES-E Integration is a European Task (III)

legally


The 2nd Renewables Directive…


I. Facts & Figures



IV.Conclusions

Agenda


Regulatory To-Do List

1)Accelerate approval procedures for new eHV lines & clear “traffic rules” to handle congestions

2)Ensure availability of sufficient back-up and balancing power

3)Marketing risk & refinement responsibility should be on the RES generators to allow for innovative solutions in system integration

4)Harmonize European RES promotion & coordinate system development among TSOs (ENTSO)


Keep the balance!

Back-up


CO2-Emissions in % compared to 1990 levels

-25 %

-50 %

-75 %

-100 %

25 %

0 %

50 %

75 %

100 %

1990 2000 2010 2020 2030 2040 2050

Kyoto- 5,2 %

IEA / OECD

+ 57%

G8

IPCC- 80-95%

- 25-40% - 50%


Reducing emissions and maintaining growth implies carbon productivity must increase by ten times

Index: 2008 = 1

Carbon productivity growth required:5.6 %/a

Real World GDP Growth at Current Trends*: 3.1 %/a

Emissions decrease to reach 20 GtCO2e by 2050: 2.4 %/a

Carbon productivity = GDP

GHG Emissions

*Global insight GDP forecast to 2037, extrapolated to 2050Source: MGI: The carbon productivity challenge

11

10

9

8

7

6

5

4

3

2

1

2010 2020 2030 2040 2050


How to make a revolution… ?

10 20 30 40 50 60 70 80 90 100 110 120 1300

10

0

8

6

4

2

Index: Year 0 = 1

Years

Carbon productivitygrowth required2008-50

US laborproductivity growth 1830-1955

Source: MGI: The carbon productivity challenge


EU Draft RES Directive: Trading with guarantees of origin

1 MWh RES-energy

Promotion of „green power“

RES-target fulfilment

Tradable by member states when fulfilling interim targets

Trading by companies, but: member states can limit import and export under specific conditions (if security of supply or environmental targets are threatened)

counts for the attainment of the national RES-target in country of payment

Every new built RES asset


UK2,8 Germany

1153

France²6,5

Spain60,5

Portugal0,5

Italy11,6

Greece1,3

Poland0,1

Czech Rep.0,2

Austria5

Netherlands0,5

Belgium2,1

Denmark0,2

Sweden0,7

Finland<0,1

Lithuania<0,1

Latvia<0,1

Estonia <0,1

Slovenia0,18

Solar Power Capacities in 2006

European Union1: 1246 MW

1)Estimation2)Overseas

departments included

Source: Photon


Regulatory Issues

Micro – Regulation (Technical) Grid connection rules safeguard stabilizing

operational behaviour of wind farms („voltage funnel“) Guaranteed right to grid access - execution requires not

even a contract! Building Code – preferential treatment for new RES

installations Priority Rule for connection, access & transportation of

„green“ power

Macro - Regulation Market orientation of the support scheme European Harmonization of RES supportHow can RES become an Integral Part of the Internal

Electricity Market?


Current Renewables footprint: 1,4 GW

Germany Wind Biomass Biogas Biomethane

123

1,231

Q1/2008: 1,354

584 245

250 228

6

OtherWind

Installed renewables capacity as of March 31, 2008 [MW] (excluding large hydro)

18

Spain Wind Biomass Small Hydro

Poland Wind

Denmark Wind

Sweden Wind BiomethaneUK

Wind Biomass

11

Portugal Wind

16

USA Wind

BiomassSmall HydroBiomethaneBiogasSolar


Development of installed global and EU PV capacity

Source: European Photovoltaic Industry Association


Wind power growth in Germany and EU

57,000

75,000

inst. cap. [in MW]

Sources: dena, EWEA

onshore

offshore

10,000

70,000

202020102007

22,09630,000

48,000

2010 20202006

180,000

Germany Europe


E.ON

Netz

P1

(t)

Pn(t)

Transformation

Pges= ΣaiPi + biPi

2 + ...

P(

t)

Forecasting wind power is critical !

Backup

Continual improvement through artificial neuronal networks

Forecast of wind speed & direction for 39 reference locations

Day-ahead feed-in prognosis for E.ON grid control area


I. Different dimensions

II. Three basic problems

III. Technical solutions

IV.Regulatory aspects

BACK-UP


Forecast error rises with wind power capacity Growing need for balancing power More fast reacting generation units needed

Sufficient conventional generation remains indispensable

Minimum feed-in 2007 in E.ON grid: 26 MW (max. feed-in: 7569 MW)

Calculative „capacity credit“ of German wind turbines: 8 % (2006) -> 5 % (2020)

Wind power hardly substitutes conventional capacity

Back-up capacity

Balancing power


Stochastic feed-in – conversion into supply profiles (I)“Wind energy refinement“

a) Day-ahead balancing between forecast and pre-defined supply profile

-1000

-500

0

500

1000

1500

2000

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 2capa

city

in M

W

Pre-defined supply profile

wind power forecast

„surplus“

day-ahead balancing

power

„deficit“


-1500

-1000

-500

0

500

1000

1500

2000

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 2

capa

city

in M

W

actual wind power

generation

wind powergenerationforecast

„deficit“Intra-daybalancing

„surplus“

Stochastic feed-in - conversion into supply profiles (II)“Wind energy refinement“

b) Intra-day balancing between prognosis and actual wind power generation


Station AB8 B9

C1T1 T2

B1 B2

B3 B4 B5 B6 C7

C2

B7

Station AB8 B9

C1T1 T2

B1 B2

B3 B4 B5 B6 C7

C2

B7

1252 123 123 123 123 123 123 123 123 123 123 123 123 123 123 123

123123123123123123123123

Station AB8 B9

C1T1 T2

B1 B2

B3 B4 B5 B6 C7

C2

B7

Station AB8 B9

C1T1 T2

B1 B2

B3 B4 B5 B6 C7

C2

B7

Control center

Bottleneck Management: Generation Management - an Interim Solution

To avoid critical overload

wind farms receiveelectronic signals to

reducefeed-in power

Once sufficient capacities

are available againoperators resume

unrestricted feed-in

Critical load level

Reduction signal

Signal: feed-in restriction

lifted again


I. Different dimensions

II. Three basic problems

III. Technical solutions

IV.Regulatory aspects

BACK-UP

Seite 41EC&R - June 2008

In Europe 20%

renewables until 2020

Key elements of the draft european renewables directive

Licenses

National support

systems and flexibility in

target fulfilment

through GoO trading

Grid access

Ambitioned development goals


Key Points of the RES-Directive

EU - RES directive E.ON`s Position

20% overall RES target and burden sharing between member states (based on economic capability, not potentials)

Effort sharing not based on geographical RES potential, but on flatrate and GDP

Introduce limited flexibility via GoO-trade with restricted participation by companies

Targets provide long-term framework to establish RES in energy mix

Very ambitious targets require efficient use of renewables (boutique to industry)

E.ON supports targets by own activities

Flexiblity in target fulfillment of member states required

GoO-trade appropriate tool RES trade key for cost-efficient

EU-wide RES expansion 1st step into right direction,

further steps would be full opening of GoO-trade


Governments and others can

resell in a secondary

market

The flow and transfer of guarantees of origin

GOs are sold with electricity to TSOs in exchange

for the feed-in tariff

GOs are sold to

TSOs in exchange

for the feed-in

premium

GOs are sold as green

certificates to

electricity suppliers

facing obligations

GOs are

sold to memb

er state gover

n-ments

GOs are sold to other

interested parties (banks,

suppliers, traders, NGOs)

GOs transferr

ed for tax

benefitsTransfe

r

Insurance

Cancellation

GOs cancelled by independent body

Producers of renewable energy are entitled to GOs


Aktuelle Diskussion in EU-Parlament und EU-Rat

Vorschläge von Turmes und DE/UK/PL

E.ON`s Position

Herkunftsnachweise (GoOs) wie bisher nur für Vermarktungszwecke

Handel auf Unternehmensebene stark erschwert (Turmes) oder abgeschafft (DE/UK/PL)

Alternative Flexibilitätsmechanismen auf Ebene der Mitgliedsstaaten (statistische Zählung)

Beibehaltung des EU-KOM Vorschlags

Unternehmen kommt als Investoren und Händlern wichtige Rolle in der Realisierung des EE-Ausbaus zu, daher muss Handel auf Unternehmensebene zugelassen werden

Kein neues System erforderlich, da vorhandenes GoO-System bereits im internationalen Umfeld bewährt

Alternative Flexibilitätsmechanismen zu komplex für zeitnahe und rechtssichere Umsetzung


Gegenargumente E.ON`s Position

Gefährdung der nationalen Zielerreichung“

„Unterminierung der nationalen Fördersysteme“

„Ausschluss neuer Technologien“

„Erzeugung von Wind Fall Profits in Höhe von 30 Mrd. €“

Schutzklauseln zur Steuerung des GoO-Handels geben ausreichende Kontrolle

Bestandsanlagen nicht einbezogen Zusätzliche Technologieförderung

möglich Nationale Fördersysteme kein

Selbstzweck Neue Technologien nicht gefährdet Teilnahme am GoO- Handel und

zusätzliche Förderung möglich Falsche Annahmen: Angaben zu 30

Mrd. € beruhen darauf, dass zu teure Technologien den Preis im GoO-Handel bestimmen

Zu hohe Windfall Profits gefährden EE-Förderung

Gegenargumente gegen GoO-Handel tragen nicht


Argumente für GoO-Handel E.ON`s Position

Flexiblere Zielerfüllung führt zu erheblichen Kostenersparnissen

Studien belegen handfeste Kostenvorteile

„Ausschluss neuer Technologien“

„Erzeugung von Wind Fall Profits von 30 Mrd. €“

Folgekostenabschätzung KOM: GoO-Handel bewirkt Ersparnis von 8 Mrd. €

Pöyry-Studie für UK-Regierung: 7 Mrd. €

Schutzklauseln zur Steuerung des GoO-Handels geben ausreichende Kontrolle

Bestandsanlagen nicht einbezogen Zusätzliche Technologieförderung

möglich Nationale Fördersysteme kein

Selbstzweck Neue Technologien können am

GoO- Handel teilnehmen und zusätzliche Förderung erhalten

Falsche Annahmen: die angegebenen 30 Mrd € Windfall Profits beruhen darauf, dass zu teure Technologien den Preis im GoO-Handel bestimmen

GoO-Handel erzeugt Wettbewerbsdruck: Kosten für erneuerbare Energien sinken

Wichtige Argumente für einen GoO-Handel


Gegenargumente tragen nicht

„Erzeugung von Wind Fall Profits von 30 Mrd. €“ Folgekostenabschätzung KOM: GoO-Handel bewirkt Ersparnis

von 8 Mrd. € Falsche Annahmen: die angegebenen 30 Mrd € Windfall

Profits beruhen darauf, dass zu teure Technologien den Preis im GoO-Handel bestimmen

GoO-Handel erzeugt Wettbewerbsdruck: Kosten für erneuerbare Energien sinken

„Ausschluss neuer Technologien“ Neue Technologien könnten am Handelssystem teilhaben und

sollten zusätzlich gezielte strukturpolitische Förderung erhalten

Seite 48

Warum ein GoO-Handel erforderlich ist

EU-weiter GoO-Handel bewirkt Wettbewerb und damit Kostenreduzierung

Nutzung der besten Potenziale

Schaffung von Wettbewerb im EE-Erzeugungsmarkt

Stärkeres Vorantreiben der technologischen Entwicklung

Ziel sollte die Ausschöpfung aller Effizienzpotenziale und die Heranführung der erneuerbaren Energien an eigenständige Marktexistenz sein.


Fazit Die ambitionierten EU-Ziele für den Ausbau der

erneuerbaren Energien in der EU erfordern einen effizienten Förderrahmen.

Der europäische Handel mit Herkunftsnachweisen stellt hierfür eine ausbaufähige Grundlage dar.

Industrie- und Strukturpolitik müssen mit anderen Instrumenten umgesetzt werden. Ein europäischer Handel wird langfristig Kostenvorteile für den Endverbraucher generieren.

In diesem Rahmen kann E.ON mit den umfangreichen Aktivitäten der E.ON Climate&Renewables einen wichtigen Beitrag zum Ausbau der erneuerbaren Energien leisten.

KOM-Vorschlag für GoO-Handel gegenwärtig bester Lösungsansatz für diese Zielsetzungen

Documents

Christian Schneller E.ON Netz GmbH, Bayreuth / Germany