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The energy industry is escalating in its disputes following the Federal Ministry for Economic Affairs’ request for argumentation support from energy providers regarding new gas power plants. Battery storage provider Christoph Ostermann feels disadvantaged and outlines necessary changes.
Capital: Mr. Ostermann, gas power plants are currently often presented as the counter-model to large battery storage systems, and there’s talk of a gas lobby trying to slow down storage expansion. Won’t we ultimately need both?
CHRISTOPH OSTERMANN: I see it that way too. I believe it’s a mistake when every interest group only promotes its own business model and sells it as the sole truth. Reality is usually pluralistic and diverse: there is rarely one solution, but rather a mosaic. I believe we need gas power plants – the question is, how many – and that storage will simultaneously be an important part of this mosaic.
Various capacity figures for gas power plants are circulating. Do you have a scale in mind that you consider sensible?
Currently, there’s talk of about twelve gigawatts for gas, and at times even 20. I could imagine that eight gigawatts would suffice. However, these capacities are needed because storage is not yet at the point where it can supply base load for a week, ten days, or two weeks. That would require enormous storage capacities.
Do rising gas costs turn the plants into a subsidized business?
Gas power plants need to be highly subsidized. The costs of generating electricity are relatively high and increase every year. Industry figures show that gas costs rose by about 15 to 16 percent last year, while the costs for battery storage fell by around 25 percent in the same period. This means storage is becoming more attractive in the long run, and this doesn’t even factor in that gas prices could continue to rise due to the situation in the Middle East and stabilize at a higher level.
There’s an accusation that battery storage is still being disadvantaged by the Ministry for Economic Affairs. Do you share this impression?
Yes, I have this impression, and I find it increasingly difficult to deny. It seems rather peculiar when the regulator asks the regulated for arguments – but only for a specific interest group, namely those who profit the most from gas power plants. Apparently, they were even explicitly asked to position themselves against storage. Together with other indications, this paints a picture that does not appear technology-open, non-discriminatory, and neutral.
However, reservations about the ramp-up of battery storage also come from neutral observers. Critics complain about a free-for-all. Grid operators are groaning under a flood of applications that they can hardly process. Isn’t that a real problem?
That is a real problem, but not untypical for young markets that initially appear very attractive. There are some professional players with capital and know-how – and many to whom this does not apply. Grid operators are frustrated because the topic is new to them, they haven’t fully grasped it technically yet, and at the same time, there are hundreds of applications on their desks – sometimes many applications for the same grid connection point.
The principle was that whoever applied first was served first. Did this fuel the chaos?
This “first come, first served” principle was problematic from the outset. Meanwhile, the realization is setting in that clear criteria are more sensible. That’s why there’s now the maturity level procedure of the transmission system operators, which is also of interest to the distribution system operators.
Another reservation is that battery storage systems are not built where they are needed and are often not operated in a grid-serving manner. Is that true?
First of all, the flexibility of storage is traded on the electricity market, and there is demand there. If someone is willing to pay, I am providing a benefit – otherwise, no one would pay. From this alone, it is clear that storage systems provide useful services.
But?
There is a conflict between grid levels. Physically, the storage is located in a regional grid, whose needs can deviate from those of the market level. The regional grid operator is not concerned with the nationwide market price, but with its specific grid situation, for example, that a lot of solar energy is being fed into a region at that moment. This can indeed lead to false incentives.
How could this be solved?
There are two ways. Firstly, the grid operator can define framework conditions stating what they expect from the storage operator. Furthermore, the Federal Network Agency is discussing dynamic grid fees for operators. Those who solve problems could receive credits on grid fees; those who are neutral pay nothing and receive nothing; those who burden the grid pay.
What hinders the expansion of storage?
We would like to build significantly more storage – not just us, but also other professional market participants. This is difficult because many regulatory issues are open, and framework conditions change frequently. Battery storage projects are very capital-intensive, with investment volumes in the two- to three-digit million range and useful lives of 20 to 30 years. The biggest killer for long-term investments is constantly changing framework conditions. But it is clear that we need storage: the share of renewable energies in the electricity mix is already around 60 percent, leading to significant volatility in generation and increasingly also in demand.
But it feels like we read every week about someone building Germany’s “largest storage.”
Building the “largest storage” is not that difficult, as there are not that many actually connected to the grid yet overall. The impression of an overcrowded market arises because the value chain is long, and many focus on the first stage: project development. They obtain permits and grid connections and then sell the project to the highest bidder.
How many truly reputable, serious players do you see in the industry?
If you look at who can actually technically plan and realize projects, purchase directly from technology and market leaders in Asia, operate them long-term, and finance them at the necessary scale, perhaps a dozen serious players remain.
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