LITTLETON — German baseload power prices have surged over 30% so far this month as a cold snap jacked up heating demand, but a projected rise in wind energy output over the coming week looks set to plug the power gap and limit further near-term price gains.
Germany’s energy system has been plagued by low wind speeds for much of 2022 so far, with wind generation totals falling below capacity levels in eight of the first 11 months of the year, according to data tracked by Refinitiv.
Combined with sharply reduced natural gas flows from Russia following Russia’s invasion of Ukraine, as well as sub-par generation from hydro and nuclear power facilities, the lower wind totals have choked overall power supplies in Europe’s largest economy for most of 2022.
However, blustery weather patterns look primed to push German wind power levels sharply higher over the second half of December, from roughly 4,000 megawatt hours (MWh) on Dec. 12 to more than 20,000 MWh by Dec. 19, Refinitiv forecast data showed.
Such a swing in green energy output should significantly ease the strain on the national power grid, and help utilities avert the need for extensive power outages in case power demand remains elevated due to the cold snap that has dragged temperatures to well below normal this month.
Resurgent renewable energy will be viewed as a success story by advocates of Germany’s energy transition away from fossil fuels, especially as German households and industry continue to grapple with record high power bills.
But in order for Germany’s industry-intensive economy to ramp up production levels to full capacity, it is vital that the country’s energy system can deliver higher baseloads of stable, affordable power.
With cheap pipelined natural gas from Russia being aggressively replaced with a hodgepodge of much more expensive imported liquefied natural gas (LNG) and dirtier-burning coal, utilities have struggled keep overall power output at normal levels.
That’s resulted in a protracted reduction in power use by businesses and heavy industry, and substantial belt-tightening among households in the form of thermostats set to lower-than-usual temperatures this winter.
Power use curbs among heavy users are expected through 2023 – with rationing triggered if natural gas reserves fall below 40% of capacity.
Recent data on energy supply growth reveals a sharp rise in renewable energy supply and use this year, however.
According to the country’s Environment Agency, Germany’s power use from renewable sources is expected to hit a record 46% this year, up from 41% in 2021.
That picture is distorted, however, by the unusually low usage levels from the main engine of Germany’s economy, its manufacturers.
The combination of astronomically high power bills and threats of potential power supply disruptions spurred many production lines to curtail run rates this year, while authorities also instructed several sectors to reduce operating rates to conserve energy supplies.
This shrinkage in overall energy demand from industry resulted in substantially lower use of fossil-fuel-powered baseload energy, and in turn made it easier for expansions in green energy supply to move the dial on renewable energy use metrics.
However, if Germany’s manufacturing base is to be restored to previous output levels – which is vital for the country’s long-term economic prospects – then substantially higher baseload power is required alongside more intermittent renewables supply.
Along with world-class engineering acumen, Germany’s high-precision manufacturers were built on access to uninterrupted and affordable power.
The recent sharp increases in renewable supplies look set to take care of the affordable part of that equation, with planned increases in wind and solar installations set to drive power costs lower over the long term.
Yet the intermittent nature of wind and solar generation means that manufacturing bases must still find a reliable supply of affordable baseload power to run their operations.
Serendipitously windy weather looks set to plug the country’s supply gap over the near term, and help avert a fresh power-price crisis this winter.
But in order to be viable over the long term, German industry needs an energy system that can produce abundant power year-round and whatever the weather.
That means that along with sharp increases in supply of cheap renewables like wind and solar, authorities must also find a way to deliver other forms of energy that can be dispatched on command whenever less favorable winds start blowing.
(Editing by Christian Schmollinger)
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