Next Kraftwerke bundles green power to meet German demand surges

Wed Sep 4, 2013 8:46am EDT

Related Topics

* Sees sales of about 100 mln euros this year - co-CEO

* Plans to expand into Austria - co-CEO

* VPP market to grow to $4.3 bln in 2020 - Navigant

By Christoph Steitz

FRANKFURT, Sept 4 (Reuters) - Power plant operator Next Kraftwerke expects to nearly triple revenues this year as it links solar, wind and biogas units to respond nimbly to Germany's sudden big surges in demand - a model it plans to export to other countries.

"We're basically acting like a big operator, it's just about many small power units that form a big one," said Jochen Schwill, co-chief executive of Next Kraftwerke, which runs one of Germany's largest so-called virtual power plants (VPP).

VPPs bundle smaller power stations, usually using renewable sources, to reach a size where they can become players in the lucrative market for balancing power - producing and selling electricity at higher prices when demand rises unexpectedly.

Next Kraftwerke was spun off the Institute of Energy Economics at the University of Cologne (EWI) in 2009, drawing on venture capital support to get started.

"When there's a plant outage or a soccer game goes into overtime, demand for power suddenly peaks and that's where we come in," said Schwill, a co-founder of the company.

The need for such flexibility is acute in Germany, which plans to shut down all nuclear plants by 2022 and where grids have to manage massive inflows from renewable sources such as wind and solar that take priority over conventional sources of power when being fed into the network.

VPPs, Schwill said, are faster in ramping up or taking off capacity than operators of coal and gas plants.

By upgrading existing software used to control power plants, the company monitors biogas, wind and solar plants and can react swiftly, sometimes within five minutes, to changes in the grid.

UNDER PRESSURE

Next Kraftwerke has contracted about 1,000 small power units, mostly from renewables, to connect 600 megawatt (MW) of capacity, about 42 percent of which can be quickly ramped up or taken out of the system to prevent the grid from overloading.

By comparison, nuclear plants usually have a capacity of about 1,000 MW.

Under pressure to integrate renewables in their portfolios, utilities are now looking to VPP as one option, joining a trend that analysts say has previously been neglected by top utilities E.ON and RWE.

Despite a strong expansion of renewables, Germany biggest utilities own just about 12 percent of the roughly 75 gigawatt (GW) of installed renewable capacity, which accounts for more than 40 percent of Germany's total.

VPPs, like the one operated by Next Kraftwerke, are set for steep growth globally, according to consulting firm Navigant.

The consultancy forecasts total worldwide capacity of VPPs will quadruple to 15,400 MW in 2020, up from 3,800 MW in 2013. Revenues could reach $4.3 billion by 2020, up from less than $1 billion this year.

Schwill said his company's revenues could nearly triple to about 100 million euros ($132 million) this year, from about 35 million in 2012, adding that it was profitable but declining to give a profit estimate.

He was confident the group could maintain its current rate of adding 30 MW in capacity per month, and said it was working on expanding beyond Germany, pointing to neighbouring Austria.

"I believe it can work the same way in other countries." ($1 = 0.7601 euros) (Editing by Anthony Barker)

FILED UNDER: