Trouble in Texas

Last week’s deep freeze across the southern US caused power outages for millions in Texas, the country’s second most populous state. Was it an isolated problem or could a similar event occur in Europe? 

Listen to a panel of experts as they delve into how Europe needs to integrate renewables and the steps needed to level the playing field for new entrants. 

Host: 

•  Richard Sverrisson, Editor-in-Chief Europe, Montel

Guests: 

• Dirk Biermann, Chief Markets and System Operations Officer, 50 Hertz
• Matthias Dilthey, General Manager, DACH, Sonnen

Transcript

Anna Siwecka, freelance journalist/podcaster: 0:01

Did you know Montel uses artificial intelligence and machine learning to forecast spot prices, inflow to reservoirs, wind, and runoff river production. We can improve forecast for your individual power plants anywhere in Europe. Contact us at ai@motelnews.com for more info.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 0:35

Hello listeners and welcome to the Montel Weekly podcast, bring Energy Matters, an informal setting. This week, we delve both far away and closer to home, looking at events in Texas and the implications for the EU power grid, if there are any. Potentially lessons to be learned. We will also be following up from a recent episode on grid congestion and how to deal with the increased amount of renewables coming into Europe's power grids in the years and decades to come. So it's my pleasure to welcome Dirk Biermann from 50 Hertz and MattiaMatthias Dilthey of Sonnen. A warm welcome to you gentlemen.

Matthias Dilthey, General Manager, DACH, Sonnen: 1:14

Hello. Hi Richard.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 1:17

If I can start with you, Dick, we've seen issues in the US over the last 20 years, now Texas, before the California PGM, even as far back as Enron. These are high profile failures, of course, for all different reasons, but. What can you say about the US grid model and what can we learn in Europe from what's happened there?

Dirk Biermann, Chief Markets and System Operations Officer, 50 Hertz: 1:38

Yeah. Most obvious is of course the reliability issue of how much society is affected by such failures by such crisis. It again, shows how much we depend on electricity, but how much in general we depend on energy. The interesting issue from a security of supply perspective from a grid operator is that. In Texas, we see these, what we call common mode failures. So it's not only an issue in electricity production, it is not only an issue in electricity transmission, but also in gas supply. And the combination of the different failures. This combination then produces the crisis. And we have seen the same phenomena in California with the wood fires. Where we at the same time had issues in the transmission grid, but also on the production side.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 2:37

It'd be too simplistic to say, or maybe even wrong to say it's down to too much renewables or too much reliance on gas when you don't have the infrastructure there to. To the power plants. Would that be correct?

Dirk Biermann, Chief Markets and System Operations Officer, 50 Hertz: 2:49

Yeah it's by far too simplistic to say. It's a combination of very different issues that we see in Texas. And the conclusion for us in Europe should be that we have to be very cautious with regard to phenomena that affect different parts of the value chain.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 3:14

So in a way it was a perfect storm of many elements. Mattias what's your view here on, on events in Texas? I know Sonnen and you are active in California maybe other parts of the states as well. What's your view of events there?

Matthias Dilthey, General Manager, DACH, Sonnen: 3:25

Yeah, first of all, I think it's horrible for the people which are affected. So it was really bad pictures to see people. Burning things to, to heat their homes and stuff. It, and as Dak said it, it shows how much we rely on energy. To me it's a bad thing that there's a blame game starting now. The so who, whose fault was it? Yeah. So that's not really helpful, I would say it's a combination of different things, but the major learnings for me are. It's of course a good thing to be part of a larger and stable grid. And what Texas did and what they decided for is to be. Not so well connected to the surrounded states. Yeah. So that they want to stay independent mostly, and they want to do things on their own. And this is maybe in such a situation, not really helpful and that's completely not comparable to Europe, where we have the UCTE grid, which is to my opinion, a big success story. So that's first of all. But then one other important thing, which I just recently read about is that it's not only a production issue there, or it was not a production issue due to the weather situation. It's in the same way. It's a demand story. Because what I read is that there was a demand was really peaking up. Like 18 gigawatts higher than the estimated winter peak load. So people immediately started to use electricity for heating purpose, much more than expected. So this is not only a question of the production capacity, it shows that it's really exceptional situation. First of all. And that, I think it makes full sense to, to have a closer look and we can get some learnings from Texas.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 5:04

Absolutely. Would you say that from your perspective there's not enough solar panels and batteries in, in the county or

Matthias Dilthey, General Manager, DACH, Sonnen: 5:10

It's of course helpful to, to be the state?

Richard Sverrisson, Editor-in-Chief Europe, Montel: 5:12

Here

Matthias Dilthey, General Manager, DACH, Sonnen: 5:12

Yeah, I mean it's, for each individual home it's, I think if you ex experience this and if you see this in the media, it's really. Yeah, I'm making you think of what can I do personally to become a bit more independent and to have more reliability on my power supply? But to be honest, that's not alone the solution. I think it has always, it's making much sense to have a strong system in the background to have infrastructure, which is in a good shape. It is not helping when now all the individuals start to fight their own game and only try to get their own homes ready.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 5:44

Absolutely. And then you see some horrific stories of power bills daily power bills thousands of dollars, which is obviously. Not a very welcome situation at all. But Dirk, if I could ask you, Mattias highlighted the sort of isolation of the Texas grid is the US grid model as it stands broken. Now, will it have to be completely reassessed? I know 50 had to jump, but but you may have some interesting reflections on what, what's happening across the Atlantic.

Dirk Biermann, Chief Markets and System Operations Officer, 50 Hertz: 6:08

Yeah, of course. The European story is a fantastic one. The full integration of the different electricity systems in Europe, the interconnection, the high degree of interconnection that also allows for major electricity transactions and emergency reserve sharing and all that. That's a fantastic story, but that is a story over many decades now. And this has not been replicated in the US so far, even though also in the US we see interconnected systems like the PGM system that is much bigger than the system in Texas. And indeed, we all know that interconnection. Interconnectivity increases security of supply, increases social welfare, increases efficiency. So maybe it's a good advice to look more into this in, in, in the States, but it's a bit difficult from outside to, to play this game now to blame people because as I said, right now, the crisis is the result of a combination of. Different. Very unfortunate failures and we should try to learn from it for Europe and not give too much advice.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 7:20

What would be the lessons here then? More interconnection. Or making an interconnection more effective to make, have gas closer to where it's being used in power plants or what are the key takeaways for you, Dirk?

Dirk Biermann, Chief Markets and System Operations Officer, 50 Hertz: 7:33

I would really take the oppor opportunity in the US to build a more interconnected system because they have the great opportunity to develop into that direction like we have done in Europe. First point. Second point, be prepared for crisis. That look a little bit unlikely, but nevertheless, that can happen. And the higher the combination of. Unlikely events is, IM probability the better you should be prepared and maybe more awareness there would be helpful.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 8:10

Do you think this would increase the calls for capacity mechanism, for example?

Dirk Biermann, Chief Markets and System Operations Officer, 50 Hertz: 8:14

Yeah, I think they have capacity mechanisms in place in Texas. So I'm not the one who can advise there. But

Richard Sverrisson, Editor-in-Chief Europe, Montel: 8:19

if you were to, if you were to redesign the power grid from scratch, what would you do in Europe?

Dirk Biermann, Chief Markets and System Operations Officer, 50 Hertz: 8:26

In Europe, I think we are, we have a policy system that is in a quite good shape. To be honest, because we were quite lucky because we started the development of the power system for other reasons than what we see today. In the past, it was more about sharing of reserves. It was about sharing the hydro storage facilities in the Alps. It was about security of supply. Nowadays that we see that we can use this fantastic system for more. Trading for integration of renewables. So we were quite lucky because we didn't anticipate that when we built the system in the past. But of course, it also means that nowadays we have to further extend the grid, further extend the system. Work on new and also more innovative solutions, but we have a very solid basis for this.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 9:21

Absolutely. Mathias, if I can ask you the same question. What if you were to design it from the power grid from scratch, what would you put in place?

Matthias Dilthey, General Manager, DACH, Sonnen: 9:27

Yeah, I think one major point for me would be to have a more decentralized approach. That, that is exactly what is, as Dx said, as from the past. What, from where we came from. Was not initially planned. So we have much more structure, which is based for which is made for centralized units, big units, big power plants, and big consumption. And to connect those. And for the households, there were, yeah, there was there as well, but there were at the end of the power line and it's one, it's, it was a one way thing so far. And now it becomes more the the situation that. The grid is used in both ways and that we have consumers coming up more and that it will become the normal situation that you don't consume energy alone, but you will be a producer at the same time, or most people will maybe. So this is really something which you could make differently if you do it now again, but still I think we are in a good transition process to get things handled. Yeah.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 10:22

We are on the cusp of big policy occurrences in our policy being. Being formulated in Brussels with the green deal, the recovery fund, the targets are clear, net zero emissions by 2050. This all means a lot more renewables coming into the system. But what the challenges here involved around increased renewable energy penetration Mathias. I think in Germany you have a very good word saying, Lauer, when there's no wind, no sun, and it's very cold in winter. How do you deal with these instances or these kind of events?

Matthias Dilthey, General Manager, DACH, Sonnen: 10:51

Yeah, we have to distinguish, the issue of the Lauer, that's more technical thing because of course, yeah, the renewables are fluctuating and you will never be able in all the times and all the days to provide enough energy from the renewable sources. That's clear. And you need some backups. You need flexibility. This will be the case, but this is not meaning that we should not build up the capacity on the renewable side. We need a lot of more capacity and for building up that capacity to, to my opinion, the most important thing is not to have, I dunno, more subsidies or things. It's more like. To make it much easier to get the hurdles down for even more people, but as well companies to invest to, to build something up even on a small scale. Yeah. On the decentralized approach. Again, to make it just easier. If you look at things like regulatory issues tax issues or how, what you have to do as a paperwork to, to get things started or the stuff about metering and anything about that, how complicated that can be. So this is actually to me these are the most hurdles we have. Yeah. So it's not about claiming even more money and say, we need more subsidies. No, we need. To make it so easy that everyone can build capacity and its approach movement.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 12:11

So basically cutting the red tape in a sense.

Matthias Dilthey, General Manager, DACH, Sonnen: 12:14

Exactly. We should come to a situation where it's, if we get to a new dynamic situation that it's driven by the market, by the people, by the participants again, and that it's not so much what are the blend numbers for added capacity? I don't like the approach to to have a blend for the next 10 years. How much capacity should come online? No. It has to be driven by the people.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 12:35

What's your view here, Dirk? With this increased amount of renewables coming online, you already have challenges in your grid area with the amount of wind and the interconnection to other markets. What are the challenges as you see them towards 2030 and beyond?

Dirk Biermann, Chief Markets and System Operations Officer, 50 Hertz: 12:48

Yeah, of course it is very clear that the renewables will further grow and they have to grow in Europe and in Germany. Take alone the 300 gigawatts offshore ambition in Europe, 300 gigawatts. This is really lot, and this will not work with the system like we have today. That will not work with the market design that we have today. So we have to be ready for change. In Germany, 40 gigawatts offshore by 2040. This is for sure also a very great challenge on a national basis. And nevertheless, we should not forget in the big picture that renewables will remain a scar resource. We will not cover the full European energy demand by European renewables, so we will further rely on imports. Like green gas, be it via pipeline, be it via LNG, I don't know, be it hydrogen or be it other carbon neutral fuels. And this will be very disruptive for the energy sector and prepare for this. With regard to the DON Cloud, yes, for sure. There will always be longer periods of time without wind and without solar power. And so we need a solution also for these periods of time. And then there are people who emphasize very much the need for gas fired backup plants. Okay, this is one solution. Others believe more in, in the load follows production philosophy. So more flexibility that adapts to the availability of, and solar power. I do believe that we will need both, so we will have kind of backup system in the future. Probably with green gas, with green fuels in gas fired power plants. I don't know how this will work exactly. Maybe on a hydrogen basis. And in addition to that, we will see prosumers who can adapt much better to changes in the availability of electricity to the changes of prices in the market. And the combination then will bring the solution for such periods of time and for the. See today already, and that will further increase.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 15:08

We talked a little bit here about supply, on the supply side, but what on the demand side with the increased electrification of transport, of heating, there's a huge growth and as well as the pursuers, et cetera. What are your projections for demand growth over the next 10 years? There, 'cause I know that the, your colleagues in the Nordic region have had some quite bullish numbers.

Dirk Biermann, Chief Markets and System Operations Officer, 50 Hertz: 15:26

It would be great to have a crystal ball there. Because we all know the different the different forecasts, the different predictions, and it is really a wide range. Some people saying that the increase of demand by electrification will be compensated by efficiency gains, and others see a tremendous increase of electricity demand. Personally, I don't know, probably a good guess would be somewhere in the middle because we don't know better. And then we have to prepare for that. I think what we should not forget is that the direct use of electricity is the most efficient use, also the most efficient way to to decarbonize. And then on top of that, we should electrify where it is hardest to decarbonize without clean electricity so that we keep a little bit the order. To decarbonize in a, in an efficient way. I think that this is important, and of course I see the development of electrification in the traffic sector. That is a given. This is clear. This will come. It's a challenge. At the same time, it is also a chance because. In particular, the new electricity consumers, like electric vehicles, like heating pumps, they will contribute with additional flexibility to the system and we can make use of this flexibility and we must make use of this flexibility. So it's a challenge, but at the same time, it's also a chance, it's opportunity for the system.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 16:58

Matthias, your company is very much a flexibility, offering flexibility to the market in terms of solar and batteries. Yeah. I'm just wondering what's your view here? And specifically recently we, we talked about dispatching and or grid congestion and dealing with grid congestion on the DSO level. But what's your view on the TSO side of things of dealing with these congestion bottlenecks in the most effective way?

Matthias Dilthey, General Manager, DACH, Sonnen: 17:21

It's true. Flexibility is is a key thing for the future. We are really. Convinced of that. Maybe to give a few numbers. We have currently something like around 270,000 home batteries in, in Germany, which would. Stand for capacity of maybe one gigawatt. And the authorities in Germany, so the BUN tour, they estimate like 10 gigawatts capacity from home IES up to 2030. So that's not our numbers, that's numbers of the German authorities. It is a huge capacity. And we should make use of it. And it can help a lot of course, to, to stabilize the system and to make the system work even if we have a much higher share of renewable energy than so the big challenge is not on the technical side so much. It's more Yeah. How we can integrate these flexibilities properly into the market. And there's currently, you face a lot of. Of different challenges'cause things are complicated in detail. And for example what our, one of our greatest concern currently is that it's not the same situation if you have a small home battery, which is used for own consumption as well, but you could of course offer flexibility to the system, then you are not treated in the same way. Compared to a big battery, which is connected to the grid and not doing something else. So it's much harder for the small ones because you have things like taxes and burdens, which are then charged to you, which is not Yeah, comparable to the bigger units. And this is really something where we have to. Find a solution for, to enable those smaller units to really take part in the market. There's a clear statement from the euro, from the European Union about that, that it should be possible and easy for prosumers to, to take part. That's not yet sufficiently respected in the German politics, to be honest.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 19:14

So it's, this is a kind of plea to, to level the playing field here Mathias.

Matthias Dilthey, General Manager, DACH, Sonnen: 19:18

Exactly. I think it's a huge potential, which is coming from the household side, and that we should not underestimate that. And we talk about assets, which are there anyway. And we, it absolutely makes sense to, to use them in the best way.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 19:33

Absolutely. What's your view here, dk? When it comes to dispatching, I know it's a very, something that's very costly for TSOs, but at the same time there are, what's the solution here is. We discussed in a recent podcast, more on the distributed side, there's the regulated answer or the more market based answer. And, the market based has had some, there's some concerns over, over the gaming and different price zones. What's your view here?

Dirk Biermann, Chief Markets and System Operations Officer, 50 Hertz: 19:56

Maybe before we come to that, I would like to. Say explicitly that I fully agree with Mathias when he said that we need some changes in the market design, in the market rules to better integrate the small scale flexibility. This is. Our interest and we have to work on this. Currently, we are working within the frame of the NABE law here in Germany on the integration, the better integration of renewables into the dispatch processes. This will help, this will increase the efficiency of the congestion management. But of course we can, and we have to go further there with regard to. Small scale flexibilities. Another point. Yes, indeed. Dispatch is extremely costly, about a billion euros per year right now. Nevertheless, we should not forget that we made enormous progress over the last years. So we are coming from times where we had read volume of 16 per year. Now we at. Te so we made significant progress. Also thanks to some grid extension. In the last years, people tend to believe that the grid is not extended and that dispatch volumes are increasing because of the energy transition. Fortunately, this is not the truth. We are making progress. And really special volumes and costs are dropping, which is good. Nevertheless, there is still a way to go in the grid development plans for 20 30, 20 35. We plan for the famous DC lines, long DC lines, mainly from north to south in Germany to connect the centers of production wind power production, mainly in the northern part of Germany. The centers of consumption more in the southern part. This is important. And then we will reach a dispatch level. At our plans two Tet hours per year in 2030, which would be a very reasonable level because in the end it does not make sense to reduce the re-dispatch to zero because in a zal market design it's not the economic optimum to avoid any re-dispatch. It doesn't simply make sense to build the grid for the last kilowatt hour.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 22:23

Absolutely. Just a final question to you, Matias. Is blockchain the answer here for grid congestion? I know there was a lot of hype around it a number of years ago, but it seems to have died down a bit. So what's your view here? I know Sonnen is a bit active with another TSO, not with 50 Hertz.

Matthias Dilthey, General Manager, DACH, Sonnen: 22:39

Yeah it's true. We are doing different projects using blockchain technology. So this is, of course, this is, a very interesting instrument or tool, but it's not the solution for everything. Of course. Maybe I can add some more words about the dispatch issue to my opinion. It's quite important to come to a more integrated solution there because we have dispatch and there will be some changes in in, in Germany later this year. So a lot of more, lot more units will be integrated in the re-dispatch process, which is good. It's still very focused on the feed insight. At the same time, we have a big discussion on. New rules on the consumption side. On, on, so to say, interruptible loads, controllable loads. On the consumption side, there's currently a political discussion between the car industry and the energy companies mainly. How to treat that because it's about charging cars in your home. And if this has to be restricted in certain times, to my opinion, the major point would be to come to a integrated solution, which makes it possible to, yeah, to take care about the feed in and the consumption side. At the same time and just make it possible to provide flexibilities in both directions and have central platforms which handled the whole process. Yeah. We will not be successful if we have a couple of very complicated isolated solutions there. And this will not be the efficient way in the end.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 24:06

Needs to be more holistic or organic. Yeah. Gentlemen, unfortunately, I feel I've only just scratched the surface, if you like, but I think it's a fascinating discussion and I'd very much like to invite you back at a later date and to discuss progress in both in terms of re-dispatch, in terms of integrating renewables and the solutions. We need to move forward and the ones in place as well, of course. So once again, Dick, thank you very much for joining us today. and Mattias, big thank you to you too. So listeners, you can now follow the podcast on our own Twitter account. Aply named the Montel Weekly podcast. Please direct message. Any suggestions, questions, or let us know if you think you have a good idea for a guest on the show, you can also send us an email to podcast@montenews.com. Lastly, remember to keep up to date with all that's happening in energy markets on Montel News. You can subscribe on Apple Podcasts and Spotify or wherever you get your podcasts from. Thank you and goodbye.