Current issues related to economy, (responsible) investment, pension and income: every week, an APG expert gives a clear answer to the question of the week. This time: Senior Portfolio Manager Infrastructure Viktor Filipan, on whether electricity grids will be used more efficiently if consumers receive a weekly forecast of the expected yield from solar and wind power.
How much more or less sun can we expect in the coming days, compared to what is normal for the time of year? And on which days will there be a lot of wind, so that our windmills will generate a lot of energy? Meteorologist Helga van Leur answers questions like these in a weekly Energy Weather Report on YouTube. It is supposed to encourage consumers to use a larger share of electricity at times when there is (too) much power supply (between 10 a.m. and 3 p.m.) and a smaller share of it when supply is scarcer (between 6 p.m. and 8 p.m.). Better for the environment, is the thought, because then the natural gas power plants will need to be turned on less often to cope with power shortages. And better for our wallets, because electricity is cheaper when there is a surplus supply. But will an energy weather report actually contribute to those two goals?
In a direct sense, there is no strong financial incentive for consumers to align energy consumption with renewable energy production, Filipan says. But if, as a society, we don’t take into account those moments of scarcity or surplus due to wind and solar power at all, it will eventually drive up the price of electricity – both during the day and in the evening.
Turning on the washing machine en masse
Filipan: “As a consumer, you now usually have a choice between single tariff and double tariff. With the latter, you pay more - the standard tariff - on weekdays from 7 a.m. to 9 p.m. or 11 p.m., depending on the region. At night, on weekends and holidays, you pay less - the off-peak tariff. That division between peak and off-peak hours is approximate. From that perspective, there is no material price incentive for individual consumers to adjust their electricity consumption any more than they already have been. Of course, there are those for whom environmental considerations are the primary reason for adjusting their electricity consumption. But based purely on that motive, people in the Netherlands won’t be turning on their washing machine en masse on days with lots of wind or sunshine.”
In a more indirect sense, however, individual consumers can benefit when solar and wind energy supply is taken into account, says Filipan.
“It used to be relatively easy to equalize electricity supply and demand. But over the years, Dutch households have started to use more electricity for functions that fossil fuels were used for in the past. Examples include induction cooking, heating with heat pumps and charging electric cars. This is generally done in the evening, when the sun is often already gone and it is not always windy either. During those times, the demand for electricity increases sharply in a relatively short period of time - peak load. With the increasing electrification of our society and the increasing generation of renewable electricity, this peak load is getting increasingly higher and matching supply and demand on the power grid is getting even more complex. Over the next decade, this challenge will keep increasing.”
The more power demand is out of step with supply, the more expensive electricity becomes. Because it means the natural gas power plants will have to be turned on more often.
“When demand exceeds supply, primarily natural gas power plants are used to meet our electricity needs. But natural gas is expensive, and with the end of natural gas extraction approaching in Groningen, the Netherlands has become an importer rather than exporter of natural gas. If enough people charge their electric cars at times when wind and solar power are abundant, less natural gas will be needed in the Dutch energy mix and that mix will be less expensive. If we don’t do that en masse, we will all be paying higher prices for electricity.”
Wind parks halted
Besides scheduling electricity consumption, there are other ways to better match supply and demand. But those ways do have their limitations.
Filipan: “Storing power in large-scale batteries is somewhat on the rise and is being used by grid companies to reduce peak loads. You can also export electricity, although that is often not a solution to a surplus. Because when there is an oversupply of power in the Netherlands, a country like Germany also often has that. Sometimes switching off power generation is the only way to avoid overloading the grid. We are already doing that with wind farms. The greatly increased generation of solar energy in recent years also increases the risk of power surpluses. This is why some municipalities in the Netherlands are already no longer issuing permits for the construction of solar parks.”
We are also investigating how we can expand the networks to cope with the rising peak load, and more and more smart technologies are being developed to match supply and demand. APG is actively investing in companies that are developing such technology, such as Groendus (smart energy management for businesses) and Net2Grid (software for additional insight from smart meters).
Ultimately, smarter electricity consumption is one of the key elements in solving this problem. For the climate, but also for the consumer’s wallet.
Filipan: “It would be a shame if we all have to pay even higher rates because we need more natural gas to meet our energy demand. After all, you could have run that washing machine on cheaper renewable electricity in the afternoon, for example. An energy weather report contributes to awareness about this and in that sense, it can contribute to more efficient use of the electricity grid. This is a collective interest, which will also benefit you as an individual consumer in the long term.”