Big Story 10

Germany's Next Kraftwerke expands virtual power plant model

FRANKFURT (Reuters) - Next Kraftwerke, a German virtual power plant (VPP) operator, is reaping benefits from increasingly green electricity markets in Europe where it aggregates small producers and sells their output in lucrative “balancing” markets.

The company’s co-founder Jochen Schwill told Reuters during a conference that the firm stands to place more than 10 terawatt-hours (TWh) of volumes on power exchanges this year, up from 9 TWh in 2015 and 5.3 TWh in 2014.

Balancing power helps grid managers cushion the sudden peaks and troughs of production that result from increasing reliance on renewable electricity in a shift away from nuclear and fossil fuels.

“Our portfolio is steadily growing, both in Germany and abroad,” Schwill said.

“We have contracted more than 3,000 power installations with an installed capacity of 2 gigawatts.”

Next’s 9 TWh production volume last year roughly equated to 1.7 percent of Germany’s total power use, illustrating the growing importance of VPPs.

Cologne-based Next is among the largest of several dozen German companies operating VPPs.

It started out in 2009 with a business model to pull together mainly biogas-to-power and wind generation and to market the volumes in the balancing markets, which pay prices in excess of the wholesale market.

Outside Germany, Next has built a presence in Austria, Belgium and, lately, France and the Netherlands.

Schwill said market reform in France, which is seeking to ditch a perceived overreliance on nuclear energy, had encouraged Next to set up a sales agency - Centrales Next SAS.

In France, it will market renewables on behalf of its suppliers who wish to sell to exchanges rather than grid operators.

In the Netherlands, Next is also seeking to win over suppliers after forming a joint venture with Energie365 of Utrecht.

“Perhaps we will be able to enter one or two other European countries later this year,” Schwill said, without identifying the target markets.

Next says in preliminary figures that it had sales of 273.6 million euros ($310.7 million) in 2015 after 184 million a year earlier. Schwill said the company is profitable.

Next was set up by its founders and venture capital firms, including High-Tech Gruenderfonds and Neuhaus Partners, in a structure that has not changed so far.

“We might have to take advantage of external financing models in the long term,” Schwill said.

Traditional utilities moving away from centralized power generation are also keen to exploit VPP business models.

Next may at some point offer its services to municipal and big utilities, Schwill said.

($1 = 0.8807 euros)

Reporting by Vera Eckert