German clean power sector under scrutiny
BERLIN: Germany’s power system has continued to clean up its act over the first five months of 2024, setting several key milestones in terms of expanded clean electricity generation and reduced fossil fuel use.

Wholesale power prices so far in 2024 are averaging 30% lower than in 2023, and are back to levels last seen before Russia’s invasion of Ukraine in early 2022 roiled regional power markets.

Cheaper, cleaner power is in turn fostering a recovery in energy use among Germany’s industries, many of which were forced to curb production since 2022 due to high energy bills and diminished consumer demand.

However, total German power generation by utilities remains somewhat constrained by the cuts made to fossil fuel generation and due to the complete halt to output from Germany’s nuclear fleet just over a year ago.

Through May, total electricity output from utilities was down 5.4% from the same months in 2023, according to German federal generation data, which indicates that power firms may struggle to meet any further climb in electricity demand without resorting to increased fossil fuel-powered output.

Regional lynchpin

As Europe’s largest economy, top manufacturer and key driver of regional policy ambitions, Germany’s energy transition momentum is closely tracked as a leading indicator of power sector decarbonisation progress for the entire region.

And with clean electricity output at new highs through May – and fossil fuel generation down nearly 17% – 2024 could enter the record books as the first year that a clear majority of Germany’s electricity comes from clean sources.

Clean power sources accounted for 63.4% of total German electricity generation from January through May, according to the German Federal Network Agency’s electricity market data platform, Smard.

That clean share compares with 55.6% over the same period in 2023, and means that the German generation system relied on fossil fuels for less than 40% of electricity so far this year.

But thanks to annual “Dunkelflauten”, or spells of low wind speeds during the summer that cut wind-powered electricity generation, total German clean power output may be capped over the coming months and may place strain on power providers if total demand creeps higher.

Some sources of clean power are likely to climb during June, July and August when both solar and hydropower output peaks.

German solar output is on track to set a new annual generation record, with cumulative generation through May already running more than 16% ahead of last year’s record.

And as solar can account for more than 25% of total generation during the summer, higher overall solar production will be a key source of clean electricity for power firms this year.

Hydro output is on course to hit its highest since at least 2019 this year, especially from pumped storage facilities that look set to hit their highest output levels in several years thanks to capacity expansions.

However, as wind has accounted for around 55% of clean power generation in Germany so far this year – and around 35% of all power – the expected further decline in wind generation is likely to constrain Germany’s power systems this summer.

Monthly output data already indicates that wind generation levels from both onshore and offshore sites are close to their expected lows for the year.

But historical trends suggest wind output will likely remain stuck near those generation doldrums until September, when weather conditions change and usher in higher wind speeds at turbine level.

Increasing electricity imports

To offset the impact of sustained low levels of wind output, Germany’s power producers may look to increase electricity imports from neighbouring nations such as France.

In 2023, Germany’s electricity imports jumped from around 120,000 megawatt hours (MWh) in May to more than three million MWh in each of the following three months, according to Smard.

German electricity imports then surged to more than 5.4 million MWh in September just as French power prices dropped to their widest discount to German power prices in over three years, data from LSEG show.

So far in 2024, French power prices have again fallen sharply below Germany’s, spurring renewed imports that last month were 18 times larger than the volumes of May 2023.

Additional large electricity imports look likely throughout the summer, but German power firms will also likely need to increase power output from coal and natural gas plants in order to ensure stable market conditions throughout the summer when wind generation dies off.

Coal and gas output through May have dropped by around 30% and 15% respectively from the same months in 2023, Smard data showed.

Lower fossil fuel use has in turn helped cut German power sector emissions by around 20 million tonnes of carbon dioxide (CO2) and equivalent gases through the first four months of the year, according to energy think tank Ember.

However, those cuts to fossil fuel use and emissions could be quickly reversed if power firms crank coal and gas-fired power over the remainder of 2024, which may be inevitable if clean power supplies remain capped just as total electricity demand rises.

Any such revival of power generation from dirty sources could dent Germany’s recent energy transition momentum, and threaten to tarnish its reputation as a green power leader.

But if German power firms manage to keep fossil fuel output to a minimum during spells of low clean power generation, the country should remain a key blueprint for ongoing energy transition efforts elsewhere in the region. — Reuters
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Germany’s power system has continued to clean up its act over the first five months of 2024, setting several key milestones in terms of expanded clean electricity generation and reduced fossil fuel use.