Berlin, June 14, 2013 2nd Annual Electricity Price & Load Forecasting Forum 13-14 June Tim Buber

Merit Order of Energy Storages by 2030 The Impact of Storage Technologies and Market Regulation on Future Electricity Prices and the Value of Flexibility Berlin, June 14, 2013 2nd Annual Electricity Price & Load Forecasting Forum 13-14 June Tim Buber 1

Agenda Research Association for Energy Markets and Technologies Motivation and Future Challenges The Concept of the Functional Energy Storage Storage Technologies and Demand Response Limitations in Price Fluctuations 2

Reserach Center for Energy Economics Independent Research in Energy Economics since 60 years Cooperation with the Technische Universität München Expertise in all fields of energy economics Foundation of Research Association for Energy Markets and Technologies in 2001 Research Association for Energy Markets and Technologies Smart Energy & Smart Markets Industrial Energy Management Urban Energy Management 3

4 Motivation and Future Challenges

Sum of Lost El. Generation from RES [GWh] Total Compensatory Costs [million ] Motivation and Future Challenges Feed-In Management Deliberate RES Cut-Offs Feed-In Management Contradiction Target: High share of RES on total el. generation 5 Source: Abschätzung der Bedeutung des Einspeisemanagements nach 11 EEG und 13 Abs. 2 EnWG BWE 2012

Photovoltaics Predicted Capacity Leistung Wind (Onshore) Predicted Capacity Leistung Motivation and Future Challenges RES in Germany Historical Development & Political Target Annual predictions of the increase of photovoltaics and wind power capacity published by the Federal Ministry for the Environment, Nature Conservation and Nuclear Safety: 70 GW 60 GW 50 GW 40 GW 30 GW 20 GW 10 GW 0 GW 2007 2008 2009 2010 FfE BMWi-0002 Flexibilisierung von DEA_00561 2010 2015 2020 2025 2030 Year Jahr 45 GW 40 GW 35 GW 30 GW 25 GW 20 GW 15 GW 10 GW 5 GW 0 GW 2007 2008 2009 2010 FfE BMWi-0002 Flexibilisierung von DEA_00567 2010 2015 2020 2025 2030 Year Jahr Increase of capacity strongly exceeds the predictions 6

7 The Concept of the Functional Energy Storage

Functional Energy Storages Overview of Storage Technologies * ** Pumped Storage CHP + Heat Storage + Power2Heat - + Electromobility Power2Gas Further Technologies Flexibilization of Load FfE Region Model Welfare and Market-Analysis 8 Expansion Scenarios * SW Münster * * EWE

9 Functional Energy Storages Definition Functional Energy Storage

10 Storage Technologies and Demand Response

11 Storage Technologies and Demand Response Flexible CHP Operation - Power to Heat

heat Heat Storage Technologies and Demand Response Basic Scheme for a Flexible CHP System CO 2 Waste Heat CO 2 Condenser Peak Load Boiler Fuel Gas Turbine/ Steam Generator steam Steam Turbine Turbine Heat Thermal Storage Flexible CHP System electricity Electrical Heating Electricity grid / EEX Electricity District Heating Grid 12 Renewables Power Plants Renewables

Heating Demand Storage Technologies and Demand Response Operation Modes for Flexible CHP-Systems Electricity- Demand/ -Supply Flexible CHP- System Heating Demand Electricity- Demand/ -Supply Flexible CHP- System Heating Demand high Heating Plant CHP Storage Heating Plant CHP Storage Sink Source Not operating Electricity Heat Electr. Heating Electr. Heating Heating Plant CHP Heating Plant CHP Storage Storage low Electr. Heating Electr. Heating 13 negative Electricity Prices / EEX high

Storage Power in GW Power/Load in in GW GW Leistung/Last in GW Leistung/Last in GW Storage Technologies and Demand Response Functional Energy Storage exemplified by CHP 80 70 60 50 40 30 20 10 0 1344 1368 1392 1416 1440 1464 1488 Stunde im Jahr 15 Hour hour of the year Year Negative Residual-Load Residual-Load Renewable Energies CHP Flexibile CHP Renewable + CHP 10 5 0-5 -10 14-15 1344 1368 1392 1416 1440 1464 1488 Hour of the Year

Storage Technologies and Demand Response Power2Heat - Potential e-boiler capacity max. thermal load (district heating) share SW Flensburg 30 MW 320 MW 9% Germany 2.700 MW 30.000 MW 9% Average secondary control reserve demand in 2012: ~2.500 MW collapse of negative control reserve market? 15

16 Storage Technologies and Demand Response Power-to-Gas

Storage Technologies and Demand Response Power-to-Gas The Concept + Large storage&transmission capacities available + Long-term storage possible Low efficiency High Investment costs [1] 17 Source: [1] Specht, Michael; Zuberbühler, Ulrich: Power-to-Gas (P2G ): Layout, operation and results of the 25 and 250 kwel research plants. Stuttgart: Zentrum für Sonnenenergie- und Wasserstoff-Forschung (ZSW), 2012

Storage Technologies and Demand Response Power-to-Gas Hydrogen Production Costs time of negative residual load in h/a full load hours for 1 GW electrolysis power in h/a 2020 2 1 2020 159 146 hours of negative residual load ( +10 GW power generation for stabilization purposes) 2030 371 344 2030 1230 1174 18-10 GW power generation for stabilization purposes

19 Storage Technologies and Demand Response Electromobility

Storage Technologies and Demand Response Electromobility Key Questions Key Questions: Where and when are how many vehicles charged? What is the capacity and energy for charging? What is the ratio of parking and charging duration? 20

Hour of Day parking probability within 15 minutes Hour Hour of of Day parking probability within 15 minutes Storage Technologies and Demand Response Electromobility Usability Factors Usability Factors @ home @ work Mo Tu We Th Fr Sa Su Mo Tu We Th Fr Sa Su 21

Number of electric vehicles in million Anzahl an Elektrofahrzeugen in Mio. Storage Technologies and Demand Response Electromobility Prognosis and Impact on Residual Load 20 15 Average storage capacity of traction battery in EVs: 26,5 kwh Das conenery - fast Szenario geht von 50 Mio. EV bis 2030 aus Scenario: 7 mio EVs in 2030 10 5 22 0 2010 2020 2030 Jahre Year IfE DGS conenergy - fast Bundesregierung conenergy - slow RWTH Aachen Flattening of the residual load only very little benefit from V2G and DSM even for 7 Mio EVs Simplified business approach (pay for capacity not for energy)

23 Storage Technologies and Demand Response Flexibilization of Load

Storage Technologies and Demand Response Demand Side Management Average DSM-Potential for Commerce, Trade and Services 2.420 MW positive 14.275 MW negative (mainly night storage heating) positive = reduction of load negative = increase of load Average DSM Potential in Industry 1.811 MW positive DSM Potential 410 MW negative DSM Potential Source: EWI, 2010 What about temporal availability? 24

25 Limitations in Price Fluctuations

Residual Load [GW] Limitations in Price Fluctuations Volatility of the Residual Load 60 50 40 30 20 10 0 Scenario PV: 60 GW Wind: 60 GW Scenario PV: 30 GW Wind: 30 GW 1 3 5 7 9 11 13 15 17 19 21 23 Hour of the Day FfE MOS_00064 26

Residual Load [GW] Limitations in Price Fluctuations Volatility of the Residual Load 60 50 40 30 20 10 0 Scenario PV: 60 GW Wind: 60 GW Scenario PV: 30 GW Wind: 30 GW 1 3 5 7 9 11 13 15 17 19 21 23 Hour of the Day FfE MOS_00064 Minimum in the morning and during noon Maximum during early noon and evening 27 Choose timeframes according to this observation in order to analyze the dynamics of the residual load

Difference between the Maximimum and Minimum of the Residual Load within used Timeframes Limitations in Price Fluctuations Volatility of the Residual Load 28 Minimum of the Residual Load within Timeframe

Difference between the Maximimum and Minimum of the Residual Load within used Timeframes Limitations in Price Fluctuations Volatility of the Residual Load 29 Minimum of the Residual Load within Timeframe

Difference between the Maximimum and Minimum of the Residual Load within used Timeframes Limitations in Price Fluctuations Volatility of the Residual Load Today 30 Minimum of the Residual Load within Timeframe

Limitations in Price Fluctuations Volatility of the Residual Load educated guessing on how storage technologies can influence the residual load Power 2 Heat + 2 GW Power 2 Gas + 0 2 GW Electromobility + 0.5 2 GW Flexibilization of Load +/- 1 2 GW Pumped Hydro Storage +/- 2-3 GW Increased Im-/Export capacities +/- 2-3 GW Today 37 12 GW possible shift by storage technologies

Limitations in Price Fluctuations Volatility of the Residual Load Though plenty of the points lie Today within the grey shaded area we will have to expect significant price fluctuations! 38

Day-Ahead Price in /MWh Limitations in Price Fluctuations Day-Ahead-Analysis 250 200 150 100 50 0-50 -100-150 -200-250 y = 0.0014x - 22.575 0 20 40 60 80 Residual Load in GW FfE MOS-KOSI_00044 Price follows predominantly the residual load Several occurences of negative prices 39 Conclusion: No predominant influence of RES in price building mechanism visible

Produciton in GW Day-Ahead-Price in /MWh Limitations in Price Fluctuations Events of Negative Prices 70 60 50 40 30 20 Production Tue., 25.12.2012 100 50 0-50 -100-150 Solar Wind Others Coal Lignite Nuclear DA-Price 10 0 FfE MOS-KOSI_00012-200 -250 40 Extrema of the day in GW Solar Wind Coal Lignite Nuclear Min 0 10.229 1.147 9.186 8.564 Max 4.843 18.416 2.506 12.258 11.121 DA-Price = Day-Ahead Price, Data-Source: transparency.eex.com

Limitations in Price Fluctuations Schemes of Remuneration The German Renewable Energy Act offers choice of the scheme of remuneration for feed-in. Earnings by Feed-In-Tariff [EUR] = Remuneration for Feed-In Rate [EUR/MWh] * Feed-In [MWh] Earnings by Direct Selling and Market Bonus [EUR] = Revenue at European Energy Exchange [EUR] + Market Bonus [EUR/MWh] = Remuneration for Feed-In Rate [EUR/MWh] + Feed-In * [MWh] +/- Imbalance Energy Payments [EUR] Management Bonus [EUR/MWh] - Monthly Weighted Average Price [EUR/MWh] 41

Limitations in Price Fluctuations Direct Selling and Negative Prices Remuneration for Feed-In Rate + Management Bonus - Monthly Weighted Average = Market Bonus + - = 91.00 /MWh 12.00 /MWh 21.98 /MWh 81.02 /MWh 25.12.2012: Prices should not have fallen below: -81 /MWh 42

January 2012 Februray 2012 March 2012 April 2012 May 2012 June 2012 July 2012 August 2012 September 2012 October 2012 November 2012 December 2012 January 2013 February 2013 March 2013 April 2013 Capacity in GW Limitations in Price Fluctuations Development in the capacity of Direct-Selling 30 20 10 0 PV Wind Gas Wind (Offshore) Biomass Hydro FfE MOS_00109 43 Hydro Gas Biomass Wind Offshore Solar Total in MW Jan 2012 344 67 933 12.062 48 59 13.513 Jun 2012 392 42 1.433 19.884 238 828 22.817 Nov 2012 445 43 1.836 23.409 308 1.961 28.002 Apr 2013 451 57 2.328 24.484 333 3.012 30.670

Limitations in Price Fluctuations - Conclusion The expected increase of price fluctuations can be limited by storage technologies to a certain extend Downwards? Limited by marginal costs of emerging storage technologies Depending on available power and capacity Limited by the remuneration scheme of direct selling Upwards? Hard coal as well as gas prices Decharging capacity of storage technologies Flexibilization of Load Electromobility (depending on charging strategy) 44

Limitations in Price Fluctuations - Conclusion Which Markets will have to deal with increasing price fluctuations? Day-Ahead: Sufficient capacity Rare occurrences of extremely low prices chance for DSM? Control reserve: Minute Reserve: hardly any revenues possible Secondary Control Reserve: Positive: extremely low revenues, going down to zero Negative: still attractive for some applications 45 Intraday: Low online-capacity demand for high flexibility high price volatility expected. high uncertainty (grid restrictions, )

Thank you for your attention and the support of 46 Tim Buber: tbuber@ffe.de / +49-89-158-121-44 Forschungsgesellschaft für Energiewirtschaft mbh Am Blütenanger 71 80995 München www.ffegmbh.de