Interview
“The Energy Market Is Still in the Stone Age”

Tobias Kurth from the consulting firm Energy Brainpool and WAGO energy expert Heiko Tautor see the energy sector as standing on the cusp of change. In the future, decentralized and digital technologies gain ground, classic power suppliers convert to service providers, new business models unify generation and consumption.

The proportion of renewable energies in electrical consumption is supposed to increase from the current level of around 30% to 100%. However, the capacities of the networks are already bumping against their limits. Can the energy transition succeed?

Tobias Kurth: Large demands have arisen for infrastructure, networks, controllers, and flexibilities, which were previously provided by controllable power plants. Biomass as the single, controllable renewable energy appears to be limited; instead, solar and wind energy have dominated the field. The problem is that electrical production in the decentralized systems fluctuates with the weather. Therefore, in addition to new networks, technologies that provide flexibility, like batteries, are necessary both to store excess current and supply it as needed. In addition, the demand for electricity must become more flexible. Up until now, supply has followed demand. This becomes more difficult at increasing levels of fluctuating supplies.

What will the core features of the future energy market look like?

Kurth: It will have to be more decentralized, more complex, and digitally controllable. Large changes are coming: the expansion of renewables has led to a reduction in marginal costs in energy production, and thus to reduced electrical prices. Therefore, electricity will replace other primary energy sources in heating and transportation. Urbanization also raises questions: since increasing numbers of people live in cities, how do we link the increasing energy requirements of urban centers with decentralized power generation? Do we move generating units into the metropolis? or do they remain outside? If the latter, we desperately need new electrical lines. In any case, intelligent systems will be required to control the increasingly complex power flows. We will also need business modules that fit the new decentralized and digitized world.

Heiko Tautor: An additional complication to the conversion of the energy system: the demands of various regions differ extensively. In the north, the priority lies in expanding the network in order to transport the wind energy from the coastal regions to the centers of consumption. Cities, in contrast, are turning to photovoltaics, and CHPs are also gaining as heat generation units. On cold, clear days, the CHPs produce both the requisite heat and also electricity in conjunction with the PV systems. Where does one store all this power? Batteries offer one solution.

In any case, intelligent systems will be required to control the increasingly complex power flows. We will also need business modules that fit the new decentralized and digitized world.

Tobias Kurth, Energy Brainpool

What options for flexibility do you see in addition to batteries?

Tautor: Power-to-heat, power-to-gas, and power-to-mobility are gaining importance. The proposal: excess electrical energy is converted into heat, gas, or synthetic fuel. This linking of sectors offers the advantage of alleviating the load on the power grid, and is also a way to link heating and transportation into the energy transition: until now, these sectors have played a subordinate role in climate protection.

Kurth: The demand for flexibility will provide other important options, primarily in the industrial and commercial sectors. Many processes are already automated and controlled using measured values. It would not be a problem to consider electrical costs as an additional control variable. If a green energy flow comes on line and electricity is offered at a correspondingly inexpensive price, the company could produce; when power is expensive, the processes could idle. Control and measuring technologies are required to enable such an approach. And it would also require an energy supplier who operates in the background to handle all of the processes for customers.

However, production companies could also offer negative reserve power to compensate for short-term peak loads.

Kurth: Not all companies will be willing to participate. During balancing power operations, they would be handing over the majority of their processes to large network operators, who would be able to intervene whenever they needed power. If, however, the companies manage their production based on electrical prices, then they remain in control of their own processes. This business model could be quite lucrative for industry.

Is the digitalization of the energy economy already so advanced that these types of models are possible?

Tautor: Actually, digitalization is only in its infancy. The potential for efficiencies in industry and commerce are enormous; however, the problem remains that these consumers scarcely communicate with the network operators. The missing pieces are the interfaces, which enable the exchange of relevant measured values between the individual actors: How much power is produced? How much is consumed? When does it make sense to shut off consumers?

Kurth: At the moment, the energy market remains is the stone age with regard to communication technology. Measurements and calculations are carried out in 15 minute intervals in the energy economy – there is no trace of real-time activity. However, there is even less communication in the private sector. The mechanical meters, for example, which record private energy consumption, are usually read once annually. The different formations need to be much more closely interconnected in the future in order to react autonomously.

The potential for efficiencies in industry and commerce are enormous; however, the problem remains that these consumers scarcely communicate with the network operators.

Heiko Tautor, WAGO

What technologies do we specifically need?

Kurth: Technologies that precisely measure, control, and monitor, and can simultaneously incorporate prognoses about power generation. And they need to function in real time. We are talking about enormous quantities of data: previously, there was one data point per consumer and one per power plant. With a total of around 400 centralized, controllable power plants, which were operating in Germany, the data were manageable. This changed with renewables. There are currently 10000 systems in the network, and the energy transition is still relatively young.

Tautor: There are already technologies that can measure, control, and monitor, with limitations. However, for the final expansion phase starting in 2030, we need systems that are smart and extremely powerful. For example: Smart meters are intelligent electrical meters that do nothing but record and forward data. They neither control nor monitor. An additional box would be required to regulate and monitor suppliers and consumers. Today’s controllers are too small and not powerful enough. We desperately need technical innovations for future applications.

What does the transition mean for electrical suppliers?

Kurth: They need to quickly begin to convert their business models, because they will no longer be able to earn enough if they only provide electricity. Customers will no longer want to buy kilowatt hours; instead, they will need energy services. They will be divided into two categories: so-called flat rate and pay-per-use customers. You can already purchase communications and entertainment as a flat rate from suppliers. Why not supplement this with an electrical supply contract. In China, they already have smart meters for everything: electricity, water, and telephones. This trend will soon appear in Germany. The opportunity for energy suppliers lies in how well they manage services in the background. And how successful they are in linking up additional revenues. For example, they might be able to identify from the load curve how old a refrigerator is. Based on this, they could offer the consumer a leasing option for a new appliance. Customers pay in part through access to their data. Anyone who does not agree, can probably set up a less transparent model. In the pay-per-use principle, customers only pay for the electricity that they actually use. Each kilowatt hour is probably more expensive in this case, but the customer can provide less data, because less data are sufficient for this model. Industrial customers could virtually make themselves invisible to outsiders: by using their own generating systems and batteries, they can supply themselves and prevent access to their own energy data. Energy services could sell or rent the systems, and thus offer industrial customers a real added value. The digitalization thus offers a real opportunity to energy providers who are capable of change.

Interview: Sascha Rentzing, WAGO

Photo: Manfred H. Vogel | vor-ort-foto.de

About the People:

Tobias Kurth studied industrial engineering with a focus on environmental technology at the Cologne University of Applied Sciences. He has worked at Energy Brainpool GmbH & Co. KG since 2013, and has served as CEO since April 2015. His focus is on the market transformation with renewable energies and on electrical price forecasting as a basis for investment and financing decisions.

Heiko Tautor is Head of Market Management Energy at WAGO and specializes in renewable energies, smart grids, and battery technologies. The 45-year-old expert in energy technology has worked at WAGO for 13 years. In addition to renewable energies, he has focused on automating distribution networks.

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Interview “The Energy Market Is Still in the Stone Age”

In any case, intelligent systems will be required to control the increasingly complex power flows. We will also need business modules that fit the new decentralized and digitized world.

The potential for efficiencies in industry and commerce are enormous; however, the problem remains that these consumers scarcely communicate with the network operators.

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Interview
“The Energy Market Is Still in the Stone Age”