Germany's energy transition has made significant strides, with renewables comprising 57% of the electricity mix in the first half of 2024. However, this rapid shift is putting a strain on the grid. According to Benedikt Deuchert of Kyon Energy, battery storage systems and optimized redispatch procedures could help integrate renewable energy more effectively and alleviate grid congestion, but several challenges need to be addressed.
Battery Storage Potential and Challenges
Battery storage systems have the capability to absorb excess renewable electricity, helping to prevent grid congestion. However, the current regulatory framework, including the "Use Instead of Curtailment 2.0" measure by the German Federal Network Agency (Bundesnetzagentur), imposes criteria on large grid-connected storage systems that do not accurately reflect their actual behavior, limiting their effectiveness. While these regulations might benefit certain industrial customers, they are not fully developed for storage operators.
The existing framework, which includes storage systems with over 100 kilowatts of power in redispatch according to §13a EnWG, might be considered sufficient by some. However, for storage systems to be effectively utilized, a fundamental revision of compensation mechanisms is necessary.
Grid Stability Concerns
A persistent issue in Germany's energy transition is the high cost of redispatch measures, which are contributing to rising grid charges. From July 2021 to July 2023, redispatch costs fluctuated significantly, ranging from €32 million to €477 million per month, with an overall upward trend. Despite the flexibility that large battery storage systems could offer, they are often underutilized due to the cost-based approach of the current system, which can make it cheaper to curtail renewable generation than to store excess electricity.
Critics argue that this cost-based approach encourages cost-inflating bidding behavior. Although concerns about the redispatch compensation mechanism were raised during consultations, the Federal Network Agency has yet to fully address them. The existing system assumes that strategic bidding can be ruled out, but this assumption does not hold true for battery storage in the cost-based redispatch process.
Need for Market-Based Redispatch
A more promising approach would involve a market-based redispatch mechanism, which could eliminate the disincentives present in the current system and enable more efficient and cost-effective use of storage systems. Rather than reimbursing inflated costs, storage systems could be compensated based on their market value for grid relief, allowing them to offer their flexibility at a lower cost. This would encourage grid-friendly behavior, as battery storage operators would be able to bid strategically, anticipating grid bottlenecks and allocating flexibility where it is most needed.
Such a market-based approach could prevent grid-damaging behavior, such as discharging during generation-related bottlenecks or charging during load-related bottlenecks, without compensation. This would avoid the issues associated with the current "Cost-Plus" redispatch system, which incentivizes inefficient behavior.
Key Challenges and the Path Forward
Integrating battery storage systems into the redispatch process is crucial for the success of Germany's energy transition. These systems can help balance the fluctuations of renewable energy and improve grid stability. However, their dynamic nature and the complexity of determining lost revenue and battery wear due to frequent charging and discharging pose significant challenges. A market-based redispatch mechanism, which accounts for the actual cost structures known only to storage operators, is essential for meaningful integration.
The Federal Network Agency faces the difficult task of developing a system that strengthens grid stability by efficiently integrating battery storage. The German government has recognized the importance of storage systems in its recent growth initiative, emphasizing the need for long-term planning security. Close collaboration between legislators, regulatory authorities, grid operators, and storage operators will be crucial to unlocking the full potential of battery storage systems and
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