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Peak demand parity - part 6

Yes, we have no base load

In the last installment, we saw that solar and wind power may soon be able to cover more than 100 percent of Germany's power demand in less than a decade. And we saw why that's a problem – the bad news is the grid and our power production structures are not ready.

The good news is that we can clearly demonstrate that a renewable future is close at hand; we simply need to ensure that we have the demand management and storage capacity for the job. Germany's “own consumption” policy is a start, but it is not based on what the grid needs – it is merely based on individual households.  

Which brings up two questions: do we need to keep the growth of solar in check? And shouldn't we focus demand management on what the grid needs rather than individual households?

Just last April, the Arrhenius Institute of Hamburg published a study (PDF) entitled "The Impact of PV on the German Power Market.” The authors investigated what I discuss above and came to a conclusion that is bound to raise any solar advocate's hair: if we are going to "buy some time," as the authors put it, in order to get the grid ready for 100 percent renewables, we may need to put a ceiling on the German solar market. The authors suggest “500 MW to 3,000 MW per year.”

Obviously, we don't want to repeat Spain's mistake and kill the market overnight. The main ones to suffer from such a drastic cut would be local installers, not global players like SolarWorld and Q-Cells. But everyone would suffer.

We don’t want low ceilings, but Germany’s policy of own consumption is also a terrible idea because it produces windfall profits at least in the amount of your power bill; the same holds true for net-metering, which is therefore also not an option after grid parity. Furthermore, own consumption / net-metering actually provides an incentive to increase power consumption if your array happens to produce more than you consume. After grid parity, we will urgently need a policy to prepare us for peak demand parity.

So what are we left with?

I still haven't heard a good argument against feed-in tariffs. If we want to set a reasonable limit, we can certainly do so with FITs after grid parity – indeed, Germany already has a ceiling-like "corridor" in the new FITs that go into effect on July 1. If more than 3.5 GW is installed, the rate for the following year goes down by an additional one percent per gigawatt up to 13 percent.  

Spain's FITs for wind power have also had an interesting corridor of sorts: instead of a fixed price, a bonus can be paid on top of the (fluctuating) market price. Think of it as a floor price with a fluctuating bonus. If the grid needs all the wind power it can get, the full bonus is paid; if the grid cannot use any wind power at all, only the floor price is paid. Generally, something in-between will be the case.

If we wanted, we could think about offering such FITs for solar as well in countries that approach an installed solar capacity near average levels of peak demand. The floor price could be high enough to just barely cover investment costs without a return, which the bonus would provide. That way, if the grid can actually accommodate more solar, solar investors will get a return on their investment. But if the grid simply cannot use more solar power, solar investments would only just break even. And while we're at it, why not do the same for wind as we approach peak demand parity?

I am not trying to suggest what the annual ceiling on solar or what exactly the reductions should be; I am merely trying to point out that FITs can be combined with other mechanisms that allow us to send price signals from the grid to investors in renewables. Sooner than we think, Germany may be setting up wind turbines and solar arrays that increasingly produce power that no one can use. I don't imagine that anyone from Alois Wobben to Frank Asbeck (or the late Hermann Scheer) wants that.

At the same time, we would have to make sure that the market is not manipulated to keep solar and wind out. Nuclear will have to go; what little baseload we have can be covered by a shrinking number of coal plants. Gas turbines will become even more important, as will micro CHP. If only half of Germany's 22 million households had a 1 kW WhisperGen unit running on biogas, that alone would be 11 GW of highly flexible power generation.

Storage could come from plug-in hybrids and electric vehicles, and load shifting, etc. could help shave peaks, but we should not expect too much from these options too quickly. We are not going to have that many electric cars too soon, and not all of them will be plugged in when we need them. Furthermore, we should not overestimate the potential of load shifting. People will not really care much whether their refrigerators cut off for a few hours during peak power demand as long as they were able to cool down a bit more in advance, but people are not going to want to see what power costs at 8 PM at night when they sit down to watch the evening news or cook dinner. Any load shifting that occurs will have to be painless. In Cuxhaven, Germany, an indoor swimming pool was only heated up when power prices were low. Patrons of the pool complained when the water was one degree colder than normal (see Sonne, Wind amp; Wärme, 07/2010, 0. 46).

By 2020, Germany may realistically have 90 GW of solar and wind capacity to cover peak demand of generally no more than 75 GW. We will have surpassed peak demand parity. The grid is not ready, and I don't believe that we are working hard enough to get it ready. The only option for slowing down the growth of solar and wind is revamping the grid. German renewables expert Volker Quaschning wrote in the May issue of Sonne, Wind amp; Wärme (p. 10), "Renewables have become so popular that no politician or power provider can be openly against them. So their uninhibited growth continues. As a result, the structure of our electricity supply will completely change, and it will do so relatively quickly.”

I would only change the verb here: it will have to change. I hope it will change. Whether it does or not remains to be seen. Certainly, German politicians who wish to extend the service lives of nuclear plants and build new coal plants do not understand how close Germany is to a renewable energy supply, nor do they realize what that supply requires. To make things worse, Germany's experiment with own consumption is not a step in the right direction, for it focuses on grid parity for solar; grid parity is an irrelevant “threshold,” and we need to focus on renewables, not PV. But maybe the discussion it brings up will produce some ideas that go in the right direction. We need to focus on peak demand parity for renewables collectively, and we need to start now.

Craig Morris directs Petite Planète and blogs about mundane matters at Always Greener.