Reducing Curtailment of Renewable Energy by Engaging Electrolysers and Power-to-Heat Plants

Reducing Curtailment of Renewable Energy by Engaging Electrolysers and Power-to-Heat Plants

Wind energy in Northern Germany often goes to waste because it can't reach consumers in other regions due to limited transmission capacities.

To tackle this, the German government amended the Energy Act in November 2023 (§13k of EnWG) to encourage certain consumers, such as electrolysers or power-to-heat plants, that are located close to wind farms to use this excess energy instead of letting it go to waste. This is also known as “use instead of curtail”.

The four German transmission system operators (TSOs), 50Hertz, Amprion, TenneT and TransnetBW, were tasked with developing rules for a two-year test phase that reduce renewable curtailment in a way that increases social welfare and reduces costs. The proposal, submitted to the regulator BNetzA in early April 2024, has the following key elements:

  • Eligible participants in the “use instead of curtail” scheme pay a fixed '13k-price' for consumed energy that is lower than the alternative costs of using natural gas for heating.
  • Participants must buy the energy from the spot market first and will be reimbursed for the difference between the spot price and the '13k-price'.
  • Participants won't have to pay network charges or taxes when using electricity under this scheme, but this compensation will only be given if it's lower than the cost of normal redispatch.

The TSOs asked Frontier to evaluate their proposal. We find that the proposed rules align with the law's goals:

  • The '13k-price' is lower than the average spot price, encouraging the use of otherwise wasted energy. The added compensation for taxes and network charges further incentivizes participation.
  • Reducing wasted resources boosts economic welfare, as long as the compensation doesn't create extra costs overall.
  • Capping compensation at the level of alternative redispatch methods ensures lower overall costs.

The test phase of the scheme will launch in October this year. Its performance during the test phase will inform future developments, with the aim to include competitive bidding as of 2026.

Click here to read the full report (DE): ANALYSE DER