Generating and distributing energy
Our energy system must be converted to renewable electricity, hydrogen and district heating in order to achieve the goal of climate neutrality by 2045.
The energy system of the future is based almost entirely on renewable energies: wind, sun, geothermal energy, hydropower and biomass from sustainable sources generate renewable electricity, climate-neutral district heating and green hydrogen. How can Germany and Europe operate this energy system in an economically viable manner? How much storage capacity is needed to guarantee a continuous security of supply? How can district heating be decarbonised? dena supports the German federal government in tackling these issues systemically and setting appropriate incentives.
Electricity as the basis
Electricity is the primary product in a climate-neutral energy system based on renewable energies. It forms the basis for the generation of green hydrogen and climate-friendly district heating and is driving further electrification in buildings, transport and the industry. This requires an acceleration in the generation of electricity from renewable energies, especially wind power and photovoltaics. Instead of having centralised fossil fuel power plants, the many smaller, decentralised producers will require a considerable expansion and conversion of the grid infrastructure. An infrastructure for the storage system is an additional element guaranteeing a security of supply. A reorganised electricity market design focuses on the needs of consumers, from energy-intensive industries to households with rooftop solar panel systems.
The System Stability Roadmap
is a roadmap for achieving secure and robust operation of the future energy supply system with 100 per cent renewable energy. A detailed milestone plan forms the centrepiece to this endeavour. The roadmap was drawn up between 2022 and 2023 under the leadership of the Federal Ministry for Economic Affairs and Climate Action (BMWK); the process was coordinated by dena and other partners. Click here for the roadmap on the BMWK website.
Secure grids
A well-developed electricity grid is crucial in order to be able to absorb a high proportion of renewable energies such as wind and solar energy. After all, these are dependent on the weather and often generate more electricity than is needed locally. A sufficient grid capacity would mean that this generation could be absorbed and transported to where it is needed. A flexible grid like this would balance out fluctuations, enabling cross-border trading on the European market. Surplus electricity at a local level can be exported and deficits offset by imports.
Ancillary services play a central role in ensuring a secure operation of the electricity grid and maintaining system stability as a whole. This includes regulating the frequency and voltage of the alternating current to balance supply and demand when dealing with fluctuating energy sources. These services must also fit into the new energy system. Published by the Federal Ministry for Economic Affairs and Climate Action (BMWK) in December 2023, the System Stability Roadmap sets out the steps required to achieve this.
Sufficient storage capacity
Storage systems are essential in the energy system of the future. They increase the security of supply and can also provide high output over longer periods of time. Hydrogen storage systems, which are created during the expansion of onsite electrolysis plants, can be used on a smaller scale. However, with increasing demand for the reconversion of hydrogen into electricity, cavern storage systems are more likely to be used. Hydrogen power plants could also be used to cover energy shortages. Large battery storage systems, whose cost–benefit ratio is developing positively, also contribute to stabilising the electricity grids.
Hydrogen storage systems are particularly suitable for seasonal storage, as they can absorb large amounts of energy over long periods of time. Due to their fast response time and limited capacity, battery storage systems are ideal for short-term storage and for balancing out daily fluctuations in electricity generation and demand.
New design of the electricity market
A new market design is also needed for the new, decentralised electricity system based on renewable energies. Various financing instruments, including contracts for difference (CfD) and power purchase agreements (PPAs), provide incentives. PPAs are a crucial factor in better market integration of renewable energies. They enable companies to purchase renewable electricity directly from the producer on a long-term basis and at a price agreed in advance. This strengthens additional investment in the expansion of renewable energies and creates planning security for plant operators. An adapted capacity mechanism also promotes investment and contributes to security of supply.
Hydrogen
Green hydrogen and its derivatives are always used where a direct supply of green electricity is impractical or technically impossible. Hydrogen is particularly in demand for the decarbonisation of energy-intensive industrial processes. It is a primary product in the chemical industry and serves as a long-term storage medium in the electricity sector as well as a fuel in shipping and aviation. In order to meet this demand, domestic production must increase and pipelines must be built. At the same time, import corridors are needed to transport hydrogen to Germany via safe routes.
Hydrogen infrastructure
It makes sense to consider electricity, gas and hydrogen networks together when setting up a hydrogen core network (backbone). Portions of the existing gas distribution networks can be converted into hydrogen networks; other portions will be decommissioned. In addition to the existing infrastructure, however, new networks must also be built for the core network. These and other challenges must be taken into account in comprehensive grid development planning for hydrogen. It is to be carried out in an integrative process together with the grid development planning for natural gas. This will allow for interactions to be taken into account and synergies to be leveraged. This planning also includes hydrogen storage systems, which contribute to the security of supply as long-term storage systems.
Import corridors
Diversified imports from different regions are necessary for a resilient, affordable and climate-neutral energy system. Germany has limited domestic production capacities, meaning it needs to import large quantities of hydrogen. On the one hand, this can take the form of pipeline-based imports of climate-neutral hydrogen gas from other European countries and neighbouring regions. A second option is imports in the form of ammonia, methanol or other renewable derivatives.
Europe has a wide range of options for producing hydrogen from renewable energy sources: the North Sea and the Baltic Sea offer untapped potential for offshore wind energy, while the Mediterranean region can draw on solar energy and its connections to North Africa. Securing this critical infrastructure plays a special role in Germany’s energy resilience.
District heating
District heating still predominantly relies on fossil fuels. Renewable energy sources are used in only around a fifth of the heat generated currently, meaning the need to decarbonise here is correspondingly large. An important component is the transformation of existing grids, particularly in industrial areas with high demand for process heat. However, the actual implementation is extremely complex.
District heating is likely to increase significantly in densely populated metropolitan areas. There are often cost advantages here compared to decentralised solutions in the heating supply.
There are two aspects to consider:
- the connection of renewable energy sources to the district heating network and heat storage and
- the tripling of the number of grid connections by 2045, as described in the System Development Strategy.
There are a number of challenges to overcome on the road to more district heating. This includes the successful rollout of municipal heating planning, a reduction of the bureaucratic processes involved and a clear regulatory framework for the district heating market. It will regulate end customer prices and facilitate third-party access for generation plants in order to improve competition.