Germany must increase flexibility, efficiency for 100% renewables power system – researchers

Germany must create more flexibility in its electricity system and strengthen efficiency for the planned transition to 100 percent renewable power supply to succeed, climate policy research project Ariadne said in a policy brief. The researchers pointed at five key challenges that policymakers need to overcome to reach an electricity system based entirely on wind turbines, solar panels and other renewable energy sources, in addition to presenting 18 points of action for the electricity market design of the future.

The key challenges Germany faces in reaching a climate neutral electricity system according to Ariadne are the expansion of renewable energy; the phase-out of fossil-based electricity generation; ensuring security of supply as the share of renewables grows; efficiently distributing local electricity generation and consumption; and minimising as well as fairly distributing costs.

"After an initial phase focusing primarily on the ramp-up of renewable energies and an accompanying reduction in fossil (and nuclear) energy generation, the requirements for the electricity market design change with an increasing share of renewable energies," the report reads.

Uptake of dynamic electricity tariffs positive in many respects

One policy measure that the researchers found to have a positive impact on cost efficiency, security of supply, emissions reduction, and acceptance was the increased use of dynamic electricity tariffs. These enable consumers to benefit from fluctuating electricity prices on the wholesale market over the course of the day. Instead of paying a set monthly fee, under a dynamic contract the price for electricity drops whenever supply is plentiful.

"Electricity prices could be made much more dynamic in future in order to better reflect the current situation on the electricity market and in the electricity grids," said the brief's co-author, Alexander Burkhardt, from the Fraunhofer Institute for Systems and Innovation Research.

With their evaluation, the researchers aimed to provide the basis for policymakers to decide in favour or against certain policy measures. "The transformation of the electricity market requires many decisions to be made that affect all social groups across all generations," said co-author Johanna Kamm. "This needs to be balanced."

Germany debates electricity market reform

Germany is set to reform its electricity market design as it moves to decarbonise its power sector. Earlier this year, the economy ministry (BMWK) presented reform options for the market elements of renewables support, flexible power use, local pricing signals and generation capacities, which can be made available whenever needed.

The aim is to ensure that the market is cost-effective; to incentivise sufficient investments in new capacity; to coordinate supply and demand with local grid development; and to increase system flexibility. Germany is still a pioneer amongst big industrialised economies in rolling out renewables – meaning the discussions that the country is engaged in at the moment looks set to become relevant for others around the world in future.