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Control Power and Variable Renewables A Glimpse at German Data

  • Lion Hirth

    (Vattenfall GmbH, Potsdam-Institute for Climate Impact Research)

  • Inka Ziegenhagen

    (Vattenfall GmbH, University of Leipzig)

Control power (regulating power, balancing power) is used to quickly restore the supply-demand balance in power systems. Variable renewable energy sources (VRE) such as wind and solar power are often thought to increase the reserve requirement significantly. This paper provides a comprehensive overview of balancing systems in Europe, discusses the role of VRE, and presents empirical market data from Germany. Despite German VRE capacity doubled during the last five years and has surpassed 70% of peak load, contracted control power decreased by 20%, and procurement cost fell by 50%. Today, control power adds only 0.4% to household electricity prices. Nevertheless, we identify several sources of inefficiency in control power markets and imbalance settlement systems and propose a number of policy changes to stimulate the participation of VRE in control provision and to improve the incentives to forecast accurately.

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Paper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number 2013.46.

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Date of creation: May 2013
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Handle: RePEc:fem:femwpa:2013.46
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  1. Müller, Gernot & Rammerstorfer, Margarethe, 2008. "A theoretical analysis of procurement auctions for tertiary control in Germany," Energy Policy, Elsevier, vol. 36(7), pages 2620-2627, July.
  2. Pollitt, Michael G., 2012. "Lessons from the history of independent system operators in the energy sector," Energy Policy, Elsevier, vol. 47(C), pages 32-48.
  3. Hirth, Lion, 2013. "The market value of variable renewables," Energy Economics, Elsevier, vol. 38(C), pages 218-236.
  4. Kristiansen, Tarjei, 2007. "The Nordic approach to market-based provision of ancillary services," Energy Policy, Elsevier, vol. 35(7), pages 3681-3700, July.
  5. Vandezande, Leen & Meeus, Leonardo & Belmans, Ronnie & Saguan, Marcelo & Glachant, Jean-Michel, 2010. "Well-functioning balancing markets: A prerequisite for wind power integration," Energy Policy, Elsevier, vol. 38(7), pages 3146-3154, July.
  6. Justus Haucap, Ulrich Heimeshoff, and Dragan Jovanovic, 2014. "Competition in Germany's Minute Reserve Power Market: An Econometric Analysis," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2).
  7. Katzenstein, Warren & Apt, Jay, 2012. "The cost of wind power variability," Energy Policy, Elsevier, vol. 51(C), pages 233-243.
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