Special tender for long-term options and demand side management products

A number of participants bemoaned that no major issues were really discussed during E-world. But the exhibitors were satisfied. One commented only that they faced a slight decrease of beer demand (roughly five per cent) compared to last year at their party at the stand. The cold spell that had been forecast for E-World did not occur and therefore, discussions – if at all – were about falling prices instead of scarcity and empty storage facilities. The latest special tenders for long-term options only concerns the infrastructure operators regarding an early emptying of storage facilities. But the special tenders of the market area operators (MAOs) were not really an E-World topic, although they took place during EWorld. I think neglecting this topic is not completely justified. In the topic of the month I try to point out what I see as the interesting aspects.

Furthermore, dear readers, you will be a bit tormented by the terms of the conversion system. The reason are the new fees and my attempt to shed a bit of light on the question whether the level is justified. In doing so, I have again fought with the terms “virtual conversion” and “commercial conversion.” You will find the MAOs’ definitions in this edition. It’s a bit of hard reading, but I hope it helps to clarify the topic.

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Framework conditions

Law on Requirements for Energy Use in Buildings

It seems to be that the German government will settle some long-time outstanding legal adjustments before the next general election in September. In the last edition there was a report concerning the amendment of the Energy Tax Law that is now on its way after years of delay and that may finally allow an extension of the tax reduction for gas fuelled vehicles.

The Gebäudeenergiegesetz (Law on Requirements for Energy Use in Buildings) is another example. The new law is to merge the Law on Energy Savings, the Ordinance Provision on Energy Savings and the Law on Renewable Energies in the Heating Sector into one coherent law. A harmonisation, but also further development of the regulation have been on the agenda of the government since the start of the electoral term. So far only the Ordinance Provision on Energy Savings was adjusted to the disadvantage of natural gas. Amongst others the primary energy factors were adjusted in favour of power based system. As a consequence, heating pumps have gained market shares in new buildings since the beginning of 2016. Already in spring 2016 a discussion draft of the Gebäudeenergiegesetz circulated (ener|gate Gasmarkt 06/16). The draft mainly provided for a simple merger of the two laws and the ordinance provision without major changes. Since the end of January a first formal draft has been released and a hearing of the associations on that draft has already taken place. The latest proposal does not substantially deviate from the earlier version, which annoys a number of associations. From the perspective of the gas industry in particular, the option is missing to fulfil the compulsory share for renewable energy in heating systems in new houses with biomethane used in condensing boilers at least partially. Only if the biomethane is used in a CHP plant, is this feasible. One positive aspect for gas: it authorises the government to enact an ordinance provision where the primary energy factors are newly defined. In doing so, the government shall take into account the climate impact of the different fuels. The gas industry has been demanding such a consideration for some time.

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Market trends

Agora Energiewende: Heating market transformation 2030

Mid-February, Agora Energiewende introduced its Heating market transition 2030 study. It was mainly carried out by Fraunhofer-Institut für Windenergie und Energiesystemtechnik (IWES). Basically it is the antithesis to the Nymoen study, although both studies were made completely independent from each other. IWES, however, does not include the period until 2050 but only until 2030. Until that year, the carbon emissions in the overall system shall be reduced by 55 per cent. IWES simulates the overall system but the analysis concentrates on the heating sector. The study does not mention any cost figures or budgets, neither in the main part nor in the appendices. However, the authors assure in the study that the model behind the analysis calculates the economically most efficient path to achieve the necessary CO2 reduction. And that path is dominated by heating pumps. Until 2030, the share in the heating market shall be 25 per cent (In 2015 it was 1.7 per cent, according to Arbeitsgemeinschaft Energiebilanzen (AGEB)). The share of natural gas will be 40 per cent and for district heating 20 per cent. Similar to the Nymoen simulation, one outcome of the IWES model is a more or less complete end for oil in the heating market. One requirement for the mass penetration of heating pumps also in existing buildings is an increase of the renovation rate from currently one per cent to two per cent. And a requirement for the high carbon reduction is an increase of the share of renewable energies in power production to 60 per cent in 2030. In addition, the application of heating pumps must be subsidised. In the trend scenario, the annual installation of heating pumps goes up from 55,000 to 90,000, but 360,000 per year are needed. The study deals in some parts explicitly on a qualitative level with the issue heating pumps versus “green” gas. The basic argument in favour of heating pumps is the efficiency advantage. The argument is as follows: The energy efficiency of hearing pumps is 300 to 450 per cent because they use heat from the environment. In power-to-gas processes, efficiency is lost in the transformation processes. Depending on the process, the efficiency is 25 to 85 per cent. IWES concedes that the requirement of renovation for the application of heating pumps is a disadvantage of these systems compared to gas. But the consultants think that “green” gas will only prevail where consumers have a preference for gas instead on renovation. But in most cases renovation will take place anyway.

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