LONDON Dec 20 Increasing German renewable power
is under-cutting wholesale electricity prices across its
borders, which may harm energy investments in neighbouring
The overall picture is of widening impacts on grids across
central Europe from the ramp up in German renewables.
German solar power generation was up 47 percent in the first
half of 2012 compared with the same period last year, and wind
power generation up 21 percent, data from the Fraunhofer
One impact from rising intermittent German wind power
generation in the north of the country is of electricity
spilling into neighbouring networks en route back into southern
Germany or Austria, called loop flows.
Another is of rising exports of cheaper, intermittent power,
undercutting the economics of baseload power in Germany's
Exports of German power to the Czech Republic, for example,
are up four-fold in the first 10 months of the year compared
with the same period in 2010.
A group of four east European grid operators, from the Czech
Republic, Hungary, Poland and Slovakia, has argued to split the
Germany-Austria bidding zone, limiting the geographical area
across which bidders can purchase wholesale power directly at
the same price.
Their stated aim is to tackle loop flows, which they
complain are using up grid capacity and destabilising networks.
But another effect would be to reduce competition with
cheap, volatile wind power, for example for Czech exports of
nuclear power to Austria.
Germany prefers to upgrade its internal grid, which should
reduce loop flows.: Chancellor Angela Merkel's cabinet on
Wednesday agreed to accelerate such upgrades.
The disagreement is evidence of widening impacts from
Germany's decision to shift from nuclear into renewable power.
Chart 1: link.reuters.com/bav74t
At present, bidding areas in European energy markets are
largely divided along national borders with exceptions, for
example, where Germany and Austria are a single zone. By
contrast Italy, Sweden and Norway are fragmented.
Germany and its east European neighbours differ on how to
deal with loop flows.
A report prepared for the German grid regulator
Bundesnetzagentur last year argued loop flows were a result of a
shift towards European Union market integration.
"Loop flows are technically inevitable, they occur
irrespectively of the existence of congestion, and they need to
be accepted according to EU law. Consequently, the occurrence of
loop flows does not constitute a reason for altering the size of
bidding areas," said the report - "Relevance of established
bidding areas" - prepared by Frontier Economics and Consentec.
Central and east European grid operators disagreed in a
report of their own, "Bidding zones definition", in March.
"We strongly believe that fundamental corrections in the
definition of bidding zones should be introduced as soon as
possible in order to improve the efficiency of coordinated
capacity calculation and allocations, as well as to avoid the
further escalation of insecure grid operation in the CEE
region," the grid operators said.
The report illustrated the difference between scheduled and
physical electricity flows across German borders.
The idea is that smaller bidding zones will bring sources of
supply and demand closer, avoiding unplanned routes.
The discussion of loop flows hides another, potentially more
political issue, however, regarding the trade impact of rising
German wind power.
For Germany, exporting wind power via large bidding zones
and closer market integration will help the country manage its
increasingly intermittent generation.
For the Czech Republic, however, it undermines the country's
own export market for baseload generation, and potentially the
investment case for majority state-owned utility CEZ
to build two new nuclear reactors.
Germany is a net exporter of electricity to its neighbours
in aggregate, the Fraunhofer Institute data show, although that
picture varies country by country.
Germany is consistently a net importer from the Czech
Republic, according to electricity exchange data from the
European Network of Transmission System Operators for
But German exports to the Czech Republic in the first 10
months of this year have risen more than four-fold compared with
the corresponding period in 2010, the ENTSOE data show.
Over the same time period Czech exports have been steady,
leading to a shrinking export surplus. (See Chart 1)
A trend of rising German exports in the past three years
corresponds with renewable power reaching significant levels.
Wind and solar power get preferential grid access on the
basis of their zero fuel and marginal costs.
The result is lower and more erratic wholesale power prices
when German wind is available, not only in Germany but in
eastern Europe, according to the European Commission's
"Quarterly Report on European Electricity Markets"
"In January 2012 monthly average power prices in the Central
East European Region (Czech Republic, Hungary, Poland, Romania,
Slovakia, Slovenia) reached their lowest levels since autumn
2010," the first quarter review reported.
"This was mainly due to a milder-than-usual weather and the
abundant wind and solar power generation in Germany.
"Price volatility reached particularly high levels in the
second half of January when the impact of renewable generation
in Germany and rapidly changing demand from the Balkans exerted
The position of the EU's executive Commission remains to be
seen, while it is a strong proponent of free trade and
efficiency in power markets.
But the strength of feeling in eastern Europe countries
suggests one way or another they will seek to shield themselves
from the ramp up in German renewable power.
(Reporting by Gerard Wynn; Editing by Anthony Barker)