BMWI Study: Expansion of Distribution Grids May Cost EUR 23 to 49 Billion

In view of the German Energiewende that aims to increase the share of renewables of 23.4% in 2013 to 80% in 2050, the Federal Ministry for Economic Affairs and Energy (BMWi) has presented a study on the need for expansion and retrofitting of the distribution grids to which 90% of all renewable power plants are connected. The study quantifies the need for expansion using three potential scenarios and points out and assesses ways to save money by using smart grid technologies and innovative planning and operating strategies.

1. Scenarios and Costs

The study has assessed the costs for the following three scenarios

a. “EEG 2014” Scenario

The scenario reflects the goals of the government laid down in the recent reform of the Renewable Energy Sources Act (EEG 2014), working with the assumption of an installed capacity of renewable power that more than doubles from presently 61 GW to 128 GW by 2032 (60 GW wind power, 59 GW solar power, 9 GW other renewable sources). Costs for grid expansion and refurbishment in this scenario would amount to roughly EUR 23 billion by 2032, the authors say.

b. Scenario B “NEP”

The second renewable expansion scenario reflects the assumptions of the scenario “B”, which the transmission grid operators used for their grid development plan for 2013. Under this scenario the installed capacity of the German renewable power plants would rise to 139 GW (65 GW of wind and solar power and 9 GW provided by other renewables). This would lead to costs for the grids of EUR 28 billion by 2032, according to the study.

c. Scenario “Länder”

This scenario reflects renewable growth based on the plans by the sixteen German states (Länder). Installed capacity would rise to 206 GW by 2032 (111 GW wind power, 85 GW solar power and 10 GW provided by other renewable sources). Costs for grid modernisation would increase to EUR 49 billion, the study estimates.

d. Assumptions and Findings

80% of the investment is needed in the medium and high-voltage grids, the study says. It works from the assumption that for grid expansion on the high voltage level underground power cables will be used, accounting for approximately two-thirds of the grid costs on the high-voltage level and approximately one third of the total expansion costs.

In total 130,000 km of new power cables will have to be laid by 2032 under the EEG 2014 scenario and 280,000 under the “Länder” scenario. Costs for the distribution grids will rise by 10 % to 20 % over the next 20 years, with 70% of the costs arising over the next 10 years.

The need for investment varies depending on the region and the voltage level. In southern Germany there will be a particular need to invest in the low-voltage grids due to continuing solar growth, while 39% respectively 33% of the investments in high-voltage grids are caused by wind power in northern Germany and eastern Germany. On the medium-voltage level the need for expansion is more or less equally distributed.

Innovative planning combined with smart technologies reduces the need for expansion significantly the study finds. This applies in particular to a generation or input management (Erzeugungsmanagement). According to the study the need for grid expansion would fall by 30% if grid operators were not obliged to provide for maximum input, but were allowed to limit input by wind and solar power plants by 1% annually. Annual costs for the integration of renewables could thus be reduced by at least 15%, the authors claim. They recommend to amend the legislative provisions accordingly. Improved reactive power or load management would by contrast reduce the need for grid modernisation only slightly the study says, whereas controllable local plant transformers (Ortsnetztransformer – rONT) would lead to a decline of the need for grid expansion in the low voltage level and reduce annual costs by 10%. A combination of generation management and controllable local plant transformers would even lead to a reduction of the annual costs by 20%. Besides it would slow down the regional spread between the grid costs. While, innovative planning would lead to falling overall costs, they often caused higher operating costs, this was not reflected in the current regulatory framework. Hence it had to be amended to set proper incentives, the study says. The calculation for the revenue caps for grid operators had to take into consideration that the need for grid expansion differed regionally, in particular regarding efficiency factors.

2. BDEW Distribution Grid Study

In March 2011 the Federal Association of the Energy and Water Industry (BDEW) had presented a study on the need for the expansion of the German distribution networks and the costs thereof in view of the integration of the expected new PV and wind power capacity until 2020.

A definitive cost estimate could not be made as the government used two different sets of figures, BDEW said at the time. One the one hand, the government’s Energy Concept calculated with an installed capacity of 33.3 GW in 2020. If one took this estimate as a basis, some 195,000 km of power lines for distribution networks had to be built at a cost of up to EUR 13 billion. In its 2010 reference scenario (BMU-Leitszenario), the Federal Environment Ministry (BMU), however, had assumed additional wind power and PV capacity of 51.8 GW. Based on this estimate, some 380,000 km of new distribution network power lines were needed, resulting in costs of up to EUR 27 billion, BDEW said in 2011.

Regarding a study on the costs for the expansion of the transmission grids published in November 2010 by the ManyElectronics Agency Dena Grid, please see here.

Source: Federal Ministry for Economic Affairs and Energy

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