Current filling levels of natural gas storages
Review of the FCR auctions with a product duration of one day
Starting on July 1st 2019, the product duration of the Frequency Containment Reserve (FCR) (or Primärregelleistung, PRL in German) was changed from a duration of one week to only one day. This provision represented an interim arrangement, since on July 1st 2020 the next change occurred which reduced the product duration further. FCR is now auctioned in six blocks with a duration of 4 hours each.Since 2015, prices in the German control energy market have exhibited a trend towards lower remunerations for the provision of power. While in 2015 FCR prices moved between 3000 to 5000 Euro per MW (and per week) of provided power, prices in 2019 moved only slightly above 1000 Euro/MW for the provision of power for one week. Regardless of the long-term trend towards lower FCR prices, a typical intra-year price development pattern could be observed in all years up to 2018 with higher prices at the beginning and at end of the year and lower prices mid-year (“tub form”, see chart above).
By comparison, in the period from July 2019 to July 2020, FCR prices were in the 100 to 400 Euro/MW range for the provision of power for one day (see chart below).At the same time, the intra-year price development pattern had also changed and moved away from the pre-2019 “tub form”. On the contrary, in November 2019 the prices fell from record high levels of approx. 300 Euro/MW/day to slightly above 100 Euro/MW/day and since then have been moving in the range between 100 and 200 Euro/MW/day.
A comparison of prices under the different auction systems is best achieved by a normalization of the FCR price in respect to the product duration. Normalized prices indicate that the weekly product reached prices of more than 12 Euro/MW/h at the end of 2018 and beginning of 2019, as can be seen in the chart below. In contrast, the FCR prices of the daily FCR product in 2019/2020 vary between 12 and 4 Euro/MW/h; they also exhibit a much higher volatility than the prices of the weekly FCR product in 2018/2019.However, eliminating the volatility and looking at the moving 7-day mean of the daily FCR product prices (dark blue line in chart above) shows a price level that is often approx. 2 Euro/MW/h below the weekly FCR product prices of the previous year (and only rarely exceeds the prices of previous year’s weekly product). The most recent difference (2 Euro/MW/h) represents a reduction of approx. 20% in comparison to the prices achieved in the previous year.
To conclude, by changing from a weekly to a daily FCR product, a long-standing intra-year price pattern (“tub form”) has been broken. With regard to price levels, it is not clear whether the reduction in 2019/2020 FCR prices vs. 2018/2019 was caused by the change of product duration or is just a continuation of a long-standing trend towards lower FCR prices that already existed before that change was made. In any case, it will be interesting to observe the effects of the most recent change of product duration from one day to the 4-hour product on price levels and patterns in the months to come.
dena publishes Team Consult study on large-scale batteries
A substantial growth in large-scale battery (LSB) installations in German over the last years offered the opportunity to evaluate the experiences made in Germany with LSBs and to summarize the main insights to make them available for use in the energy industry and energy policy in other countries. In the context of the German-Turkish cooperation in the energy sector and supported by the Federal Ministry for Economic Affairs and Energy of Germany, the German Energy Agency (dena) assigned Team Consult with the preparation of a respective study. This study, titled “German experiences with large-scale batteries – Regulatory framework and business models”, has now been published and is available for download from dena’s website.
Corona Energy Market Radar
The latest edition of our Corona Energy Market Radar is now available for download here. The key takeaways are as follows:
- The pandemic and its consequences have faded from the spotlight as economic indicators show that a recovery is underway. At least this is what the ifo business climate index indicates. It showed substantial increases for key industry branches in June as well as in July.
- The recovery of power consumption is progressing rather slowly. Power consumption hit a low at the end of May, at -12% underconsumption compared to previous years (4-week moving average). Since then, consumption showed an increasing trend and most recently stood at -8% compared to previous years (in calendar week 32).
- The consumption of gas did not suffer as much as power from pandemic-related effects. Due to favorable commodity prices (lower gas prices, higher prices for CO2 emission allowances), utilization of gas-fired power plants was considerably higher than in previous years. As a consequence, total gas consumption in the months of June and July was actually higher compared to previous years. This can be explained by comparing Germany’s Merit Order of power plants for 2017 (the first year of our reference period) to that of 2020: gas-fired power plants moved to the front, while those fired by hard coal moved further to the back.
- For the entire year of 2020, we therefore expect only a slight drop in gas consumption compared to previous years – despite the Coronavirus pandemic and despite above-average temperatures in the first quarter. Decreases in gas demand were at times overcompensated by above-average consumption in the power sector, and this made up for part of the temperature-related under-consumption in the first quarter of 2020.
LNG Market Radar
Low gas prices are taking their toll in the form of declining LNG exports from the U.S. After utilization of European import terminals had begun to decrease in Mai and shipments of U.S. LNG planned for the summer had been canceled, the load factor of U.S. terminals (measured by gas flows into U.S. terminals for liquefaction) plummeted in June – to around 50 per cent compared to pre-pandemic levels. At the same time, the trend of Europe becoming the major sales market for U.S. LNG in 2019 and early 2020 is beginning to reverse, in favor of Asia and Latin America.
Our LNG Market Radar identifies such key developments in the global LNG market and presents them in a straightforward manner. In the first issue, (beside Europe) we focus on the U.S. that assumes a role as swing producer in the market. You find the edition here.
Results of the auctions for biomass under the Renewable Energy Act
The coronavirus pandemic has led to an exceptional situation for the realization of renewable energy and co-generation projects. Therefore, the Federal Network Agency (Bundesnetzagentur, BNetzA) adapted the auction procedures to meet the current situation. For the time being, the decisions on the awarded bids are not immediately published on the internet, whereby the deadlines for the realization of projects, penalties and payments of secondary guaranties are extended. This procedural change concerns biomass facilities as well solar, onshore wind, co-generation and innovative co-generation auctions. Exceptions apply to existing biomass facilities and to tenderers who specifically request an individual publishing. Currently, the BNetzA is planning to return to the regular auction procedure from 1st September 2020 on.
So far, five tenders for power generation from biomass have been conducted. The most recent biomass auction took place in April 2020. 41 bids were submitted during that auction with a total volume of 92 MW. This meant that once again the auction was undersubscribed by about the same margin as the previous auction November 2019. Bids were placed for 55% of the announced volume in both auctions. This, however, marks an improvement compared to the first three tenders, in which bids were placed for only 31% of the announced volume on average.
Based on calculations of the German Biomass Research Center, the German Federal Association of Bioenergy argues that the maximum auction price set by the BNetzA is in many cases below the electricity production costs. Therefore, according to the association, more than 80% of biomass facilities are unable to participate in the auction process.
During the April tender, three bids were excluded. All other 38 bids were awarded, resulting in a success rate of 93%.
The volume-weighted average price of awarded bids amounts to 13.99 ct/kWh in April 2020 which is more than 1 ct/kWh higher compared to the 2019 auctions.
Operation of European regasification terminals decreased in the second quarter of 2020
Utilisation of European import terminals decreased slightly in the second quarter of 2020. Especially from the beginning of May on, there was a clear drop of utilisation. The average daily send-out in April was about 3,470 GWh/d (Q1’2020: ~3,420 GWh/d) but dropped from May on by around 15 % to 2,960 GWh/d. So the Covid-19-crisis has a visible impact on utilisation rates.
Since the beginning of May, the TTF front month contract price has been constantly below 6 EUR/MWh and hit a record low at around 3.50 EUR/MWh at the end of May. During May and in the beginning of June, the TTF front month price was constantly lower than the U.S. natural gas lead index ‘Henry Hub’. Market participants reacted by cancelling U.S. LNG cargos, as the news already reported. In early June, the TTF front month price climbed above the Henry Hub front month price again (TTF: 5.50 EUR/MWh on 26.06.2020; Henry Hub: 4.55 EUR/MWh on 26.06.2020), but this spread will hardly be enough to incentivize market participants to order new US LNG cargos.
H2 Market Radar
Hydrogen is currently one of the most discussed topics regarding the transition of the energy systems. The main reason is the expectation that hydrogen will be a key component in decarbonizing those sectors for which no other carbon-neutral option is available.
In the second quarter of this year, the Netherlands, Norway and Germany published their national hydrogen strategies. A common denominator of these strategies is that – in addition to national efforts – they are banking on international cooperation. This is perfectly complemented by the European Commission’s announcement that it will publish its own strategy very soon.
A number of projects for the production and use of hydrogen have been initiated in the last five years. However, only a limited number of hydrogen facilities exist today with capacities mostly in the one-digit megawatt range – therefore it is still a long way to achieve a total capacity around five gigawatt (which is the objective of the German hydrogen strategy for 2030).
Our H2 Market Radar follows the developments and progress in the hydrogen sector and illustrates these developments in a straightforward manner. As a start, we focus on Northwest Europe, since due to new large offshore wind parks and its well-developed gas infrastructure, this region has excellent preconditions for building up an integrated hydrogen business.
Our first edition shows, that the at current project plans would lead to an expansion of hydrogen production capacity by a factor of more than one hundred. You find the edition here.
Current filling levels of natural gas storages
Corona Energy Market Radar
A month has passed since we published the last issue of our Energy Market Radar. That means it’s time for a new issue (no. 3), that you can find here. It contains our updated scenarios, based on the latest data on the development of business expectations in the industry as well as expectations for GDP growth.
We have used the time since the previous issue for a deeper analysis as to whether the observed reduction in energy demand could also have been caused by factors other than Covid-19 and the partial lockdown and if there are any effects working in the opposite direction (demand increase). The finding in brief:
- In the gas market, a substantial part of the reduction in consumption so far was temperature-related (i.e. temperatures in 2020 have so far mostly been higher than in previous years 2017-2019)
- For large consumers (industry and power plants), there are effects at place which are driving gas demand in opposite directions. While demand by the industry has substantially decreased, the record-low gas prices have stimulated gas demand for power generation
One additional note on how to understand our scenarios and evaluations – our scenarios on gas and power consumption (page 1) show the pandemic-related effects we expect for the entire year 2020. The analysis of key branches of the manufacturing industry (page 2) are a snapshot in time of how things currently stand (based on historical correlations of business expectations, industry production and energy consumption).
The decline in wholesale commodity prices on the spot market seems to have come to a halt, and some prices even show a slight trend reversal. Nevertheless, some prices are still more than 50% below forward prices in 2019 for deliveries in 2020. This is particularly problematic for companies that have to sell excess volumes on the spot market these days.
Corona Energy Market Radar
Since early March we have been dealing with the impacts of the Coronavirus pandemic.
As an essential infrastructure, the energy industry has not been directly affected by the restrictions of public life. As the crisis drags on, however, the question arises which economic risks the current situation entails for the energy industry.
The number one necessity for companies engaging in the purchase and resale of energy is to keep the purchase and sales portfolios in balance volume-wise and price-wise at all times. In times of crisis with consumption of energy plummeting, however, this important balance can turn into a severe imbalance quickly. When a company’s energy portfolio is long and energy has to be sold on the trading market at prices significantly below purchase costs, this can pose a substantial threat.
To assist affected companies in evaluating the situation and coming to the right decisions quickly, we have developed the “Corona Energy Market Radar”. It translates general economic data into outlooks for the energy sector and summarizes the relevant information in a brief, easy-to-digest overview.
The newsletter contains scenarios for the development of electricity and gas consumption in 2020. Moreover, an estimation is given regarding the decrease of energy consumption in the most important branches of the industry segment. This is based on the ifo institute’s business climate index (as the leading indicator) and the respective DESTATIS production index (as the trailing indicator) for each branch.
For further information, please refer to our Newsletter Corona Energy Market Radar. In case you would like to receive this information on a regular basis via e-mail in the future, please let us know by emailing us to firstname.lastname@example.org.
We mourn for Bernhard Witschen
On Holy Saturday we received the sad message that our longtime colleague Bernhard Witschen had passed away.
With Bernhard’s passing away, we are losing an exceptional and endearing person, advisor, mentor and friend.
After his studies of business administration and engineering at RWTH Aachen University, Bernhard Witschen worked in the energy industry for more than 40 years. Mr. Witschen served in the management of various holding companies in the RWE group for many years, including as executive director of Thyssengas from 1998 to 2003. Moreover, he was accountable as board member at RheinEnergie AG for the purchase and sale of energy and for the power plant segment from 2003 until his retirement in 2008.
After his official farewell, Bernhard continued to share his longtime experience in different roles. Since 2008, he supported Team Consult as an independent consultant and senior advisor.
His unmatched mix of empathy and expertise of the energy industry was highly appreciated by colleagues as well as clients.
He will always have a special place in our memories.
The trend of prices for primary control energy (FCR) and its influence on large scale batteries
The provision of primary control energy is still the central source of income and main field of application for large scale batteries in Germany. This remains the case even as the multi-use approach has become the standard for large scale battery operation and reduced the dependency on only one field of application. The multi-use approach combines several single applications, for example next to the provision of control energy, the large scale battery can be employed for power price arbitrage on the spot market and for peak-shaving to reduce grid charges.
Operators of large scale batteries have been struggling with low prices for control energy for several years. The trend continues in 2020 – primary control energy prices have fallen below 1000 €/MW/week at the beginning of the year. For 2019, the price curve shows a development that deviates from the pattern observed in the past years (i.e. the tub form).
Next to a change in the tender system, which was introduced on July 1st, 2019, the 30-minute rule was overturned by the Federal Network Agency (Bundesnetzagentur) and large scale batteries were treated equally to other systems providing primary control energy. The 30-min rule demanded that large scale batteries provide the primary control energy for up to 30 minutes instead of only 15 mins, as is the case for other systems. Due to this reduction of the duration, the large scale batteries can increase the marketable power of the already existing system, since the working range of the state of charge of the battery increased. The changes in the tender system and the abolishment of the 30-minute rule are influencing the primary control energy prices, while the downward trend of the FCR prices continues.
Large scale battery projects are operating in difficult economic conditions. The increasing number of providers of primary control energy (an increase from 16 providers in 2015 to 31 beginning of 2020) raises the competition in the market. An additional point is the tender deadline of primary and secondary control energy, which will coincide starting from the July 1st, 2020 on. Therefore, providers of control energy, which can provide primary as well as secondary control energy with their systems (such as pumped-hydro storage, gas or lignite coal power plants) are forced to either bid for only one of these control energy products or split their power into two bids for each of these products, since a change after the first unsuccessful bid to the second product is not possible anymore. This might lower achievable control energy prices. However, the before mentioned process may reduce the liquidity in the primary and secondary control energy market which could lead to an increase of control energy prices. For large scale batteries, which so far only provide primary control energy, this means a continuously uncertain market perspective.
The harmonization of the control energy market is aimed to accomplish a reduction of the operation costs of the European energy system. However, the question arises, if the operators of systems for the provision of control energy can sustainably operate with the current market conditions and prices.
Harmonizing the German control energy market to EU guidelines
Control energy is employed by transition system operators (TSO) to balance fluctuations of the grid frequency and available grid power and represents a valuable tool to guarantee the stability of the power grid. The EU directives regarding the development of the European electrical system, which took effect in 2017 (2017/2195: „Electricity Balancing Guideline“, EB GL and 2017/1485: „System Operation Guideline“, SO GL), lead to changes in the German control energy market. The harmonization of the present electrical system in Germany with the guidelines of the EU commission affects the tendering system and certain properties of the different types of control energy.
The changes of the primary control energy are summarized in the following table.
Since 01.07.2019, the tendering of the FCR is performed daily with the tendering deadline being set two days in advance. The duration of the FCR drastically decreased from a weekly to a daily product. This tendering system is valid until the 01.07.2020. Starting from this date on, the duration of the FCR is further reduced to four hours. The day is split into six blocks, each with a duration of four hours. The tendering is performed for the following day and the deadline is set to 8:00. Next to the tendering system and product duration, the remuneration method changed significantly, since the bidder is not remunerated for his actual bid (pay-as-bid) for the provision of control energy, but it is based on the “pay-as-clear” method, which means that all bidders are remunerated with the price, which received the last successful bid with the highest price. The Dutch system uses the pay-as-clear method already for a longer time for the remuneration. An additional important point is concerning the prequalification of control energy providing facilities. The prequalification needs to be renewed every five years and affects likewise the already prequalified systems.
Providers of FCR have to adapt their bidding strategy to the changes of the new tendering system. A large part of the providers of FCR can fall back on experiences from the tendering system for secondary and tertiary control energy, since these products follow similar rules. The changes in the tendering system are supposed to increase the competition and decrease the costs for the procurement of control energy. The future will show, if the current development is sustainable and if the providers of FCR are capable of successfully endure these adaptations.
What happens with the German gas storage filling levels?
Preparations for possible supply disruptions caused by a suspension of gas transits via Ukraine were one of the reasons for the high injections into German gas storages throughout the past injection season. At the beginning of the current withdrawal season German gas storage filling levels reached a historic high at above 99% (226 TWh on the basis of AGSI data).
Due to the lack of a cold spell in the current winter 2019/20 storage withdrawals were so far only modest. As a result the filling level of German storages still stood at 87% at the beginning of February. Typically, the filling level is around 55% to 65% at this time of the year.
On the supply side, gas flows from Russia through the Nord Stream pipeline and entries via Mallnow remained constant over the past weeks. Despite an agreement on the transit of gas via Ukraine, gas flows via Ukraine were reduced markedly. Because of low seasonal gas demand and high deliveries from north-west European LNG terminals the supply situation is not affected.
To provide an outlook on the possible storage filling levels at the beginning of April the daily withdrawals of the years 2017/18 (high withdrawals) and 2018/19 (low withdrawals) were used as benchmarks.
- Under the assumption that high storage withdrawals occur throughout the remainder of the winter, a storage filling level of about 100 TWh can be expected.
- By contrast, continued low storage withdrawals would lead to a storage filling level of about 170 TWh by the end of winter.
By contrast, continued low storage withdrawals would lead to a storage filling level of about 170 TWh by the In the latter case a lower gas demand in the coming summer can be expected. Provided that the supply situation remains good this situation will increase the pressure on wholesale gas prices so that even historically low prices would not come as a surprise. A similar situation occurred in the years 2014 and 2019 which were marked by high storage levels at the end of winter. This led to low wholesale prices during the summer. Under these preconditions a high utilisation of gas fired power plants can be expected.end of winter.
Current developments in the German large-scale battery market
Within 2019, a total amount of 79 MW of large-scale battery projects was completed in Germany. Compared to the large-scale battery projects completed in 2018, which summed up to 157 MW, the installed power of the newly completed projects reduced significantly. The main reason for the reduction in the newly completed large-scale battery projects in 2019 is presumably the decline of the prices at the primary control energy market, which represents the primary field of utilization in Germany for large-scale batteries.
The total amount of installed power of all large-scale batteries within Germany summed up to 428 MW at the end of 2019. Considering the local distribution within Germany, a clear separation between northern, wind rich and the southern Germany with lower wind power potential is observed with more than 75% of the installed large-scale battery power being located north of the “Main river”, which is used by the German Federal Network Agency so separate North and South of Germany based on system relevant power plants (we allocate the following federal states to the north of the “Main river”: North Rhine-Westphalia (NW), Schleswig-Holstein (SH), Brandenburg (BB), Lower Saxony (NI), Bremen (HB), Saxony (SN), Mecklenburg-Western Pomerania (MW), Hamburg (HH), Saxony-Anhalt (SA) and Berlin (BE)). This distribution is explained by the high installed generation capacity of renewable energies in the north of Germany, especially of wind power. The fluctuating power generation makes a balancing necessary, to which the large-scale batteries contribute.
Regarding the utilized battery technologies, the Lithium-Ion technology has the considerably highest share of all battery technologies with 81%. Compared to the other battery technologies, it offers a high energy density, high charge and discharge power and additionally low self-discharge. Lead-acid batteries have a share of 16%, substantially less than the Lithium-Ion technology. The advantages of this reliable technology are the relatively low investment costs and the high operational safety.
Redox-flow batteries with a share of 1% are currently only used in a handful of projects. The technology offers a high operational life and safety, combined with a low self-discharge. It offers an outstanding scalability, due to the storage of the electrolyte in tanks. However, the energy densities are relatively low and investment costs are higher compared to other battery technologies. Since 2017, the German utility company EWE is planning the construction of a redox-flow battery, which would use salt caverns to store the electrolyte. This redox-flow battery could reach an overall storage capacity of 700 MWh (which is nearly 1.5 times the current large-scale battery storage capacity within Germany). Nevertheless, the initial operation is currently expected only after 2025, due to technical and economic difficulties.
Results of the auctions for onshore wind energy
On December 20th, the German Federal Network Agency (BNetzA) published statistical data for the last auction for onshore wind energy plants in 2019. In total 76 bids were submitted in the auction according to the Renewable Energy Sources Act (2017) with a total amount of 686 MW of power, which exceeds the announced tender volume of 500 MW considerably. An oversubscription of the announced tender volume occurred for the last time in August 2018. The number of bids increased considerable compared to the bid before (with only 25 bids), however, compared to the number of bids from the years 2018 and 2017, it remains on a lower level.
An increase of the number of bids in the last quarter of 2019 could be explained by the restriction of the maximum tender limit for 2020, which remains constant at 6.20 ct/kWh. The unchanged maximum tender limit swept off the hopes of participants for a higher maximum tender limit beginning with February 2020 (which would have been based on August, September and October at 6.70 ct/kWh).
Only two bids were excluded in the December auction, which results in an exclusion rate of 3%. Due to the oversubscription of the announced tender volume, 56 bids received an award, corresponding to a success rate of 74%, as low as in February 2018 for the last time.
The average award value amounted to 6.11 ct/kWh, which is the same level as of beginning of 2019.
BDEW publishes „Kompendium Grünes Gas“ (compendium of green gas)
The Bundesverband der Energie- und Wasserwirtschaft e.V. (BDEW), the German Energy and Water Association, has published a compendium of green gas. Team Consult has developed the compendium in cooperation with BDEW. It highlights different possibilities to decarbonize natural gas. The compendium can be downloaded from the BDEW’s website (LINK). It is available in German language only.
Dutch Gate terminal highly utilized as LNG imports to Northwest Europe increase
In recent years, utilization of European LNG import terminals was rather low, with an average utilization of mostly below 30%. Especially the regasification capacity of the Dutch Gate terminal was only slightly used (below 10%). This situation changed in the fourth quarter of 2018. Utilization of the terminal’s regasification capacity increased strongly and reached a record high of 82% in April 2019.
With the commissioning of new LNG liquefaction capacity in the U.S. and Russia (Yamal LNG) the European market is a welcome outlet for the producers - especially due to the "geographical proximity" of Europe. Longer transport distances to Asia and very low price spreads between both markets favor the Northwest Europe as export destination. While in the first five months of 2018 a total of 79 TWh of LNG was regasified and sent out into the gas grid from the terminals in France, the UK, Belgium and the Netherlands, it was about 265 TWh in the same period in 2019 (+235%).
Europe becomes the main importer of U.S. LNG and further increases its import capacity
In the first three months of 2019 the three U.S. export terminals in operation shipped about 4.4 bcm (billion cubic meters) of natural gas to Europe. For the time being, European importers became the main outlet for U.S. LNG, relegating Asian customers to second place. Except for Lithuania, all European countries (incl. Turkey) with large-scale import infrastructure have already received cargoes from the U.S. this year, including for the first time Greece and Belgium. The main European import countries were France, Spain and Italy.The increase in European imports of U.S. LNG concurs with a decreasing spread between Asian and European prices which has been almost zero since the beginning of 2019. From the perspective of U.S. exporters, this development increases the attractiveness of the European market due to the shorter transport distance to Europe compared to Asia.
Concerning the development of the European import infrastructure for LNG, two investment decisions have been taken so far this year – both receiving financial support from the EU. The projects concern the capacity increase of the Polish LNG terminal in Świnoujście and the construction of an LNG import terminal on the Croatian island of Krk.
In the course of the trade dispute between the U.S. and China, Europe is a welcome outlet for U.S. export volumes. While China has risen to be the second largest importer of LNG after Japan only two cargoes with U.S. LNG have arrived at Chinese import terminals since January this year. Currently, China levies a 10% tariff on imports of U.S. LNG and considers increasing this tariff further.
Team Consult analysis 2019 confirms significant growth of the German energy storage industry
The German energy storage industry is still on track. Team Consult has conducted an analysis of the German energy storage market in cooperation with the German Energy Storage Association (BVES) and confirms the growth of the previous year impressively: The German energy storage industry has exceeded the revenue mark of 5 billion Euros in 2018. What's next? What are the challenges of the years to come?
More information can be found here.
Prices for power control reserve
Since the beginning of 2019, prices for Frequency Containment Reserve (FCR) have been continuously quoted below the level of the previous year. Average prices have been below 2000 €/MW since the end of January and dropped to a value of 1389 €/MW in the last week of February, thus only marginally above the historical minimum value of 1337 €/MW.
The prolonged price depression has undermined the primary business model of large-scale battery systems, thus causing a stagnation of new projects in the German market.
Trading Activity at the TTF
The trend of falling prices at Western European hubs continued in February 2019. The front month contract with delivery at the TTF changed hands at 22.51 EUR/MWh with start of the year and closed at 17.65 EUR/MWh on February 28th. This price level was last seen about one year ago. Above average temperatures during the usually coldest month of the year led to weak demand, while supply with pipeline gas and LNG was plentiful. Traded volumes were slightly below previous month’s level.
Results of the auctions for onshore wind energy
On February 15th, the German Federal Network Agency (Bundesnetzagentur) published statistical data for the first auction for onshore wind energy plants in 2019 (published in German). 72 bids were submitted to this auction according to the Renewable Energy Sources Act 2017(EEG), which took place in February 2019. The number of bids remains thus low, despite a slight increase with respect to the previous round (62 bids). Five submitted bids had to be excluded from the auction, resulting in an exclusion rate of 7%. All of the remaining 67 bids received an award, corresponding to a success rate of 93%.
The average award value amounted to 6.11 €ct/kWh and was thus again only slightly below the bid limit, which was specified at 6.20 €ct/kWh by the Federal Network Agency.
Results of the auctions for photovoltaic installations
On February 15th, the German Federal Network Agency (Bundesnetzagentur) published the results of the first auction for photovoltaic (PV) installations in 2019 (published in German). 80 bids were submitted to the auction, which took place in February 2019. This means a slight increase with respect to the previous round (76 bids).
Two of the submitted bids had to be excluded from the auction. The resulting exclusion rate of 3% is thus again very low. In the end, 24 bids received an award, corresponding to a success rate of 30% – significantly less than in previous rounds. The majority of awards (21) were granted to bids for plants on farmland in Bavaria.
The average award value amounted to 4.80 €ct/kWh, slightly above the value of the previous round (4.69 €ct/kWh). The lowest successful bid value was 4.11 €ct/kWh. The bid limit was specified at 8.91 €ct/kWh according to the EEG 2017.
Filling levels of natural gas storages in January 2019
At the beginning of January, German gas storage facilities had an aggregated filling level of 75 percent (174 TWh), a good 9 percentage points above the previous year's level. Over the course of the month, the level fell by 12 percentage points to 61 percent (142 TWh). This figure was still a good 9 percentage points above the level at the same time last year.
Looking at the daily withdrawals, January showed a divided picture. In the first half of the month, up to 1.4 TWh per day were withdrawn at peak times. In the second half of the month, temperatures dropped and withdrawals increased significantly, peaking at up to 2.1 TWh per day.
Solar & wind load vs. intraday power price
The December is naturally marked by low solar power generation. During the middle of the month wind power production was also relatively low. Between 11th and 20th of December the daily average intraday power prices (15-minute contracts) was continuously above 50 €/MWh with a maximum of more than 100 €/MWh on December 14th.
On December 9th, however wind power generation was especially high. On that day the average price fell below zero Euro/MWh.
New EU emission limits for capacity mechanisms
At the end of December, the EU institutions have provisionally agreed on new rules for future back-up power plants. According to the new regulation, power stations emitting more than 550 grams of CO2 per kilowatt hour of electricity shall not be eligible to be used in regulated capacity markets.
Team Consult has performed a brief analysis on the effects of the new EU rules on the German power market. The article was published on the energy information portal www.europeangashub.com. It can also be downloaded free of charge via the link below.
Results of the auctions for CHP plants
On December 12th, the German Federal Network Agency (Bundesnetzagentur) published the results of the third auction for combined heat and power (CHP) plants according to the Combined Heat and Power Act (KWKG) (published in German). Following the initial publication, the results were modified on December 17th.
18 bids were submitted to the auction, which took place in December 2018. This is an increase with respect to the previous round (15 bids), even though the tendered volume of 77 MW was significantly below the value of the previous auction (93 MW). With 126 MW, the total bid volume was above the previous value (96 MW) as well.
Three submitted bids had to be excluded from the auction. 12 of the remaining 15 bids received an award, corresponding to a success rate of 67%.
The average award value amounted to 4.77 €ct/kWh and has thus increased by about 11% with respect to the previous round. The lowest award value was 3.49 €ct/kWh, the highest award value 5.25 €ct/kWh. In spite of the relatively low competition, the award values were thus again considerably below the bid limit of 7 €ct/kWh.
Amendments to the Combined Heat and Power Act: New Opportunities for CHP plants?
On last Thursday (14 December 2018), the Federal Council of Germany announced its final approval for the so-called “Energiesammelgesetz”, which had been previously passed by the German Federal Parliament. The bill will enact extensive changes to the German energy law, in particular with respect to the further development of renewable energies and the funding for combined heat and power (CHP) plants.
What opportunities arise for operators of CHP plants? Team Consult has assessed the implications in a short study, the conclusions of our analysis can be found here (PDF download, in German). If you are interested in an English version of our analysis, please do not hesitate to contact us.
Short report about the lifecycle extension of batteries from electric vehicles through stationary storage
Electric mobility is gaining more and more relevance, which leads to an increased demand for batteries. As a result prices for battery cells have been increased recently by some automotive suppliers. A possibility for car manufacturers to avoid passing on higher costs to end customers is the extension of the life cycle of batteries. In that way additional revenues can be generated. A possibility for the lifecycle extension of batteries is the pooled usage in stationary large scale batteries.
A detailed description of these developments and possible consequences for investors and operators of conventional large scale battery projects is given in this report (PDF download, in German).
Results of the auctions for onshore wind energy
On October 19th, the German Federal Network Agency (Bundesnetzagentur) published statistical data for the fourth auction for onshore wind energy plants in 2018 (published in German). 62 bids were submitted to this auction according to the Renewable Energy Sources Act (EEG) 2017, which took place in October 2018. This is a significant decrease with respect to the previous round (91 bids), even though the tendered volume of 670 MW remained unchanged. 8% of the submitted bids had to be excluded from the auction. Although a slight increase with respect to the previous round (5%), this is still a comparably low value. All of the remaining 57 bids received an award, corresponding to a success rate of 92%.
The average award value amounted to 6.26 €ct/kWh. This is the highest value since the introduction of the auction scheme in May 2017. The bid limit was specified at 6.30 €ct/kWh according to the EEG 2017.
Results of the auctions for photovoltaic installations
On October 19th, the German Federal Network Agency (Bundesnetzagentur) published the results of the third auction for photovoltaic (PV) installations in 2018 (published in German). 76 bids were submitted to the auction, which took place in October 2018. For the first time in more than a year, this means an increase with respect to the previous round (59 bids).
Three of the submitted bids had to be excluded from the auction. The resulting exclusion rate of 4% is thus again very low. In the end, 37 bids received an award, corresponding to a success rate of 49% – the highest value so far. However, the required secondary bid bond was only paid in time for 30 bids. In contrast to their above-average success in previous rounds, projects in less-favored areas received only 5 awards in the current auction.
The average award value amounted to 4.69 €ct/kWh and has thus for the first time increased with respect to the previous round (4.59 €ct/kWh). The lowest successful bid value was 3.86 €ct/kWh. The bid limit was specified at 8.75 €ct/kWh according to the EEG 2017.
More than half of local distribution companies offer PV storage systems to end customers
Recently the mark of 100,000 installed PV battery storage systems has been exceeded in Germany. Battery storage for households is no niche anymore. As a consequence many energy providers offer these storage systems to their customers. Team Consult has analyzed the product range of supra-regional suppliers and incumbents in major German cities. This analysis of almost 90 energy providers shows that more than half (56 %) offer battery storage systems to household customers, often in combination with PV systems. 17 % of surveyed companies offer solely PV systems without battery storage. More than a quarter of energy providers include neither PV systems nor battery storage in their product range.
Advantages and disadvantages of PV and battery sales activities need to be weighed thoroughly. On the one hand, an increased self-supply of household customers might lead to decreasing energy sales. This development however can hardly be stopped by renouncing respective sales activities, due to the product availability from other companies. On the other hand, PV and battery sales activities provide new revenue streams. By offering related services, such as maintenance and monitoring, a long term customer retention can be ensured. In order to implement a successful sales strategy energy providers have to take into account individual aspects like customer structure and other existing sales activities.Figure: PV- and battery storage product range of local distribution companies in Germany
*partially in combination with PV system
Source: Analysis Team Consult
Team Consult evaluates relevance of the energy storage industry
Energy storage systems are getting more and more attention in the light of the advancing transition of the energy system. However, so far there has been no quantitative basis for the evaluation of the relevance of energy storage systems and especially of the energy storage industry. On behalf of the German energy storage association (BVES), Team Consult has conducted an industry analysis to close this knowledge gap.
The highlights of our findings have been published in the September edition of the German journal “Energiewirtschaftliche Tagesfragen“.
Analysis on changes for automatic frequency restoration reserve
On 12 July 2018, new tendering procedures for automatic frequency restoration reserve (aFRR) came into effect. Team Consult has analyzed the first auction rounds under the new market design. Among others, we observed a decrease in the average capacity per bid. Moreover, capacity prices increased during the short period in which capacity was allocated based on the new mixed price procedure.
Market participants should be prepared to quickly react to price fluctuations and, if necessary, adjust their bidding strategy in case of a prolonged shift of the significance of capacity and energy price.
These and further conclusions of our analysis can be found here (PDF download, in German). If you are interested in an English version of our analysis, please do not hesitate to contact us.
Storage monitoring by RWTH Aachen confirms Team Consult's analyses regarding the German PV storage market
On July 16th the RWTHA Aachen published its annual storage monitoring report 2018, which contains inter alia information regarding the development of PV storage systems in Germany. According to the report there have been 31,700 newly installed PV storage systems in 2017, more than ever before in one year. Thereby the total number of storage systems of this kind grows up to 85,000 in Germany by the end of 2017, resulting in a cumulative storage capacity of 280 MW and 600 MWh.
These figures are very congruent with analyses of the German storage market carried out by Team Consult for the German Energy Storage Association (BVES) earlier this year. Team Consult expects a continuation of the positive development of the PV storage market in 2018, leading to a cumulative storage power of roughly 385 MW.
Team Consult successfully supports in the CHP tendering process
On June 12th, the German Federal Network Agency (Bundesnetzagentur) published the results of the second auction for combined heat and power (CHP) plants according to the Combined Heat and Power Act (KWKG) (published in German). Prior to the auction, Team Consult advised a local distribution company regarding the investment decision for a CHP plant and supported the client in developing a bidding strategy. We are pleased that the jointly developed strategy was successful and that the bid of our client received an award.
15 bids were submitted to the auction, which took place in June 2018. This is a decrease with respect to the previous round (20 bids), even though the tendered volume of 93 MW was only slightly below the value of the previous auction (100 MW). With 96 MW, the total bid volume decreased by more than 50 % compared to the previous round (225 MW).
Only one submitted bid had to be excluded from the auction. All remaining 14 bids received an award, corresponding to a success rate of 93 %.
The average award value amounted to 4.31 €ct/kWh and has thus increased by about 6 % with respect to the previous round. The lowest award value was 2.99 €ct/kWh, the highest award value 5.20 €ct/kWh.
Publication of dena's pilot study "Integrated Energy Transition"
The German Energy Agency (Deutsche Energieagentur, dena) has published the final results of its pilot study “Integrated Energy Transition”. As a study partner, Team Consult has actively contributed to the study. The scope of the study was the development of scenarios for the transformation of the German energy system until 2050. Scenarios of a “pure electrification” were contrasted with scenarios of a “technology mix”. Key takeaways are:
- In order to reach its climate targets (80 to 95 per cent emission reduction by 2050 in comparison to 1990), Germany will have to speed up emission reduction significantly compared with previous years
- In the technology mix scenarios, climate targets can be met at lower costs than in the electrification scenarios
- In all scenarios Germany will remain a net importer of energy
- Gas-fired power plants and energy storages are essential contributors to system stability
- The climate targets in the transport sector require synthetic (carbon neutral) fuels, especially in the case of heavy duty trucks
We are convinced that the study will have a substantial impact on the energy policy debate in the years to come. We are prepared to discuss the energy economic and corporate strategy consequences with you.
A summary of the results can be found here (link to dena).
Interview with “energate messenger+” on the deal between E.ON and RWE
In the German energy industry, there is a continued discussion going on about the deal announced by E.ON and RWE. One particular question in dispute is whether (and, if so, to what extent) the new entities are becoming too powerful in their respective markets. Team Consult has analyzed the consequences of the deal for the German energy landscape within the scope of a multi-client study. In an interview with “energate messenger+”, Jens Völler, member of the management team of Team Consult and one of the authors of the study, gives insight into the results.
Significant growth of the German energy storage industry
Team Consult has analysed the German energy storage market in cooperation with the German Energy Storage Association (BVES). Christoph Hankeln presented the results of the study at the Energy Storage Europe in Düsseldorf on 13 March 2018.
The study shows that the German energy storage industry generated revenues of 4.6 billion Euros domestically and abroad in 2017. In 2018, the revenues are expected to exceed 5 billion Euros for the first time. Furthermore, the number of employees is very likely to rise over 12,000. A particularly strong growth is expected in the segment of industrial battery.
More information can be found here.
Energy & Natural Resources 2018 Virtual Round Table
The Energy & Natural Resources Roundtable 2018 features seven experts from around the world. In this roundtable, managing director Madjid Kübler and the other experts outline how to attract capital in the current stressed financial climate, discuss the current M&A landscape, and detail recent regulatory changes and developments. Highlighted topics include: hydropower, oil and gas, mining, and the trend towards cleaner energy sources.
Team Consult’s merit order model used to assess developments on the German electricity market
International commodity price reporting agency ICIS consulted Team Consult about our view on current developments on the German power market. Price modeling based on our in-house merit order model confirmed the current market interpretation that forward prices do not contain a risk premium for a potential accelerated coal-phase out. “It seems that power contracts account for definite developments such as the nuclear phase-out, but not necessarily for uncertain changes such as an accelerated coal phase-out,” Team Consult’s senior consultant Dr. David Heinze was quoted in the ICIS market assessment.
Article “Arbitration” published by “Lawyer Monthly” magazine
In an interview at “Lawyers Monthly” magazine, Madjid Kübler comments on the changes in arbitration proceedings and provides an answer to the question of how to prepare best for arbitration hearings.
Article on European LNG terminal infrastructure published
The energy industry will likely face the occurrence of a global oversupply of natural gas for the next years to come as further liquefaction capacities are under construction. Europe with its liquid trading hubs is well-positioned to receive additional LNG volumes due to surplus regasification capacity. However, regasification costs and access conditions of European LNG terminals vary greatly and might have a major commercial impact on future LNG volumes. These differences have been analysed by TEAM CONSULT in an article, which provides an overview of the LNG regasification infrastructure in the European Union and gives some brief insights on regasification tariffs as well.
Madjid Kübler as chairman at the FLAME 2017 in Amsterdam
As in previous years TEAM CONSULT will take an active role at the FLAME. Madjid Kübler will be chairman of the stream “Gas Demand & Competitiveness” and therefore be in discussion with several experts of the energy industry.
Europe’s largest gas event will be taking place on 8-11 May 2017 at the Okura Hotel in Amsterdam.
Industry professionals from across the globe will be meeting at FLAME and discuss the latest market trends, challenges and developments worldwide.
For more information click here
Presentation published on whether German gas storages are regaining importance as a provider of flexibility in Europe
In recent years, Europe and Germany have experienced an oversupply of gas storage capacity. In contrast, despite high filling levels in October 2016, we saw critical stock levels of the European and German gas storages in February 2017. These were the lowest levels in February since European-wide recording has been conducted by Gas Infrastructure Europe. In our presentation we identify and analyse the drivers for this development, which in sum led to these low stock levels.
Our analyses shows that German gas storages are regaining importance as a provider of flexibility in Europe. However, further developments, which can either have a positive or adverse effect on storages, have to be considered and analysed before the conclusion can be drawn that storages have seen the end of the dry spell.
The presentation was published on the energy information portal www.europeangashub.com and can also be downloaded free of charge via the link below.
Natural gas supply ensures security of supply of European energy systems
Low filling levels of European gas storages fuel the discussion on the security of gas supply in the winter season. Madjid Kübler, managing director of TEAM CONSULT, assesses the situation in a guest commentary for the energate messenger+ of 7 March 2017.
New Article on renewable energy auctions published
Since 2017, the German funding for electricity generated from wind, solar or biomass energy is determined by auctions. Auctions increase the cost pressure and pose new challenges to project developers and investors. Team Consult has identified several key aspects that should be considered from the initial project development decision until the final investment decision and realization of the project. Important factors are the required upfront investments, the total costs and the realization probability of the project, the bidding dynamics and the volume of the current and future auction rounds.
The highlights of our findings have been published in the March edition of the German journal “Energiewirtschaftliche Tagesfragen“.
Article on Dispute Resolution in Gas Contract Renegotiations published
Buyers’ strong desire for the transition from oil-indexation to gas hub pricing has been the driver for the disputes in Europe with some 100 billion cubic meters (around 3.5 trillion cubic feet) of annual contract quantities renegotiated, and billions of dollars in dispute. Europe's experience with renegotiations of long-term gas contracts may provide some lessons for the emerging Asian natural gas market which Team Consult discusses in an article.
New article about the development of battery storage in Germany published by Greentech Media
Germany plays a leading role when it comes to the deployment of battery storage. 2017 is expected to be a year with a significant increase of small and large scale battery systems. TEAM CONSULT estimates that the installed capacity will threefold by the end of 2017 compared to the previous year.
The article “Germany`s Banner Year for Big Batteries”, published at Greentech Media, focuses on these developments and the consequences for the profitability of battery storage projects.
New Article on renewable energy auctions published
Since 2017, the German funding for electricity generated from wind, solar or biomass energy is determined by auctions. This leads to new questions for market participants: How will the market environment develop? When is it expedient to make the upfront investments which are necessary to submit a bid? Team Consult has analyzed the results of the auctions for photovoltaics installations that have taken place so far. Our analysis shows that economies of scale play an important role, but the decisive factors for a successful bid are the proper timing of the bid submission and the optimal bidding strategy.
The highlights of our analysis have been published in the January edition of the German journal “Energie & Management“.
Large Scale Battery Storage for Power Grid Stabilization in Germany – Growth expected in 2017
Germany’s power industry will expand installed capacities for grid stabilization more than three-fold in 2017, reaching up to 200 MW end of 2017 (60 MW end of 2016).
This is resulting from a study composed by TEAM CONSULT analyzing the market of energy storage.
An article about this has been published by Thomson Reuters.
Study published on how much additional gas the North-West European gas market can absorb
At the moment, the energy industry is discussing the occurrence of a significant worldwide oversupply of natural gas. It is expected that the oversupply of gas will be the dominant situation also for the years to come and will be a key market driver for gas industry players. In a study, Team Consult finds that, if prices are right, the European electricity sector could absorb around 40 billion cubic meters (31 million tons per annum) of additional gas volumes per year by substituting coal-fired power generation.
The study was published on the energy information portals www.europeangashub.com, www.globallnghub.com and www.thecoalhub.com was quoted by Thomson Reuters. It can also be downloaded free of charge via the link below.
Full study for download in PDF format.
Energy Storage capable of linking sectors in the context of Energiewende
Christoph Hankeln, Business Unit Manager Energy Storage, has been interviewed about the findings of the TEAM CONSULT study “Energy Storage – Game Changer for the Energy Industry”. Within this study TEAM CONSULT analyses new technologies and solutions for the storage of energy in the context of the German energy transition.
New BWK article published (in German)
The article provides an overview on the developments and perspectives of the gas industry in the past year. 2015 turned out to be another turbulent year for the gas and energy industry and the sector continuous to face several challenges. For the future security of supply of Europe several pipeline projects were planned or rejected but intensely debated in any case. Tackling climate change took a new step forward after the UN Climate Change Conference in Paris which established the aim of limiting global warming to 2°C or even 1.5°C. Further important issues were discussions on the digitalisation of the energy industry as well as sector coupling. This will put gas in the heating market in direct competition to power from renewable energies. All of these developments have the potential to change the existing business models of energy suppliers. At the same time new opportunities appear on the horizon, e.g. by using LNG as a transport fuel.
New Article on Thermal Energy Storage/Power-to-Heat published
Local distribution companies increasingly invest in thermal energy storage systems in order to allow for an economic operation of their co-generation power stations. In this scope, the integration of a power-to-heat module (PtH-module) to use excess electricity is often discussed as well. Which parameters are relevant to the investment decision? A current short study of Team Consult provides first answers. According to the study, investing into thermal energy storage may be profitable in the current market environment, while the market conditions for power-to-heat providing negative balancing energy have deteriorated.
The highlights of the results of the study have been published in the June edition of the “Zeitung für kommunale Wirtschaft“. For further information, please contact us by phone +49 30 400 556-0 or mail email@example.com. David Heinze will be glad to address your questions.
Madjid Kübler as speaker at the LNGgc Asia conference 2016
The LNGgc Asia conference will be taking place in Singapore from 1st until 3rd March 2016. The conference is the leading Asian LNG conference to bring together emerging buyers, traders, key suppliers and LNG project developers from the emerging economies with the need for gas and LNG. Madjid Kübler will be representing TEAM CONSULT and will be speaking about “Impact of oil prices on gas markets and on prevailing pricing mechanisms”.
For more information click here
TEAM CONSULT at the DVGW Diskurs 2015, 9 September in Bonn
“Technical innovations are driven by changes”. Under this headline the DVGW Diskurs will discuss the perspectives for gas from national and international points of view. The event is moderated by Dr. Heiko Lohmann, publisher and author of ener|gate Gasmarkt. TEAM CONSULT will be represented by Madjid Kübler who will give a presentation on “Gas from the international perspective”. Thereby the trends on the international LNG markets and the future supply situation of natural gas in Europe will be highlighted.
For more information click here
TEAM CONSULT at EUROFORUM "Versorgungssicherheit Gas" (Security of supply in the gas sector)
The EUROFORUM conference "Versorgungssicherheit Gas" will be taking place in Hamburg on 1st and 2nd July 2015. TEAM CONSULT will be actively supporting the event with Mr Jörg Blaurock as a speaker and Mr Bernhard Witschen as the presenter of the conference. Mr Blaurock will talk about the topic of "new sources of supply: where will gas come from in the future if not Russia?".
You can find more information about the event at: