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Regarding the Grid and Solar PV, US Utilities Are Asking ‘What Would Germany Do?’

As the world's largest solar energy market, Germany sets an example for the do's and don'ts of integrating solar into its power supply. And it has indeed put in place policy and technology mandates in recent years to help it maintain the health of the grid.

"Grid stability is not a problem for solar," said Bruno Burger, professor of power electronics at the Fraunhofer Institute of Solar Energy Systems.

Germany's cumulative solar energy generation capacity has reached around 37 gigawatts as of April 2014, or about 21 percent of the country's total power generation capacity, according to data compiled by Burger.

But in terms of the actual energy produced, solar occupies a smaller slice of the market. During the first quarter of this year, the country produced 5.7 terawatt-hours of solar electricity, making up about 4 percent of the total electricity generation during that period, according to a Fraunhofer report. Overall, solar on average accounts for about 5 percent of Germany's annual electricity production, Burger said.

That amount isn't considered significant enough to warrant major changes to rules for operating the grid and managing the conventional electricity supplies to ensure a smooth integration, according to the International Energy Agency. That is, until the saturation rates hover between 20 and 40 percent, the agency said in a report.

But the capacity and energy saturation rate alone don't explain how and why the grid hasn't sagged by the increase in solar energy generation. It's taken policy changes — some controversial — over the years to control solar energy development to both ensure solar's integration into the grid wouldn't be painful and to reign in the cost.

In fact, on April 9, the German cabinet approved changes yet again to its renewable energy law, including a cap of 2.5 gigawatts of new solar generation per year, to slow the pace of rising electric bills for homeowners.

The changes, scheduled to go into effect in August, reflect policymakers' goal to check the solar energy growth even while it charts out long-term plans to replace nuclear power with renewable energy, a reaction to the Fukushima nuclear plant disaster in 2011. Nuclear energy accounts for about 18 percent of the country's electricity generation.

Germany's solar incentive program has always been engineered to gradually reduce the levels of incentives. The idea is that the market will need less help over time as it grows and the prices of equipment and installation drop. But lawmakers have tinkered with the pace of reduction and the amount of installations that are deemed acceptable over the years.

As a result, Germany added 3.3 gigawatts of solar in 2013, a big drop from the 7.6 gigawatts installed in 2012.

"In the past, there were 7 or 8 gigawatts of solar installed (per year) and that proved unsustainable from a grid-management perspective and expensive from a consumer perspective," said Anna Czajkowska, head of the European policy at the Bloomberg New Energy Finance.

The incentive program guarantees premium prices for selling solar electricity into the grid. Home and small business owners help to pay for the difference between the premium pricing and the market rates for cheaper, conventional sources of electricity (mostly from coal and nuclear). Industrial users are largely exempted from the surcharge, a measure designed to protect their competitiveness in the global market and criticized for shifting too much of the cost of renewable energy growth onto consumers.

Worse yet, the spread between the market rates and solar premium pricing has grown in recent years as coal-fired electricity has become less expensive. Germany has increased its coal-based electricity generation as it works on weaning itself off nuclear. That renewable energy surcharge, at 6.24 euro cents per kilowatt-hour, is set to add up to nearly €23 billion in 2014, Czajkowska said. The surcharge covers solar, wind and other forms of renewable energy, but solar makes up the largest chunk of it.

The fact that Germany has encouraged mostly distributed generation — rooftop solar panel installations rather than large solar power plants like the ones being built in California's rural pockets — minimizes the need for expensive investments in grid upgrades in the near future. Certainly, the need to build transmission lines is small when power generation isn't far away from where it's used.

"The big advantage of [rooftop] solar is that it's distributed. Your production is consumed by you or your neighbor's house," Burger noted.

The same can't be said for wind energy production in Germany. The country's wind electricity generation takes place mostly in the north, including the offshore projects, yet many of its most intensive energy users are in the industrial south. The need for that long-distance travel has exposed inadequate interconnections in Germany's transmission network and prompted grid operators to route power to neighboring countries such as Czech Republic at times. The country is working on plans to upgrade its transmission system but they will likely take 5-10 years to finalize and a similar time frame after that for construction, Burger said.

The falling incentive levels for solar play a part in avoiding expensive distribution grid upgrades in the near term. Policymakers' aggressive move to reduce the price that grid operators must pay for solar electricity in recent years led to it being lower than the price homeowners would otherwise pay their utilities for power starting in early 2012, Czajkowska noted. That move encourages homeowners to use what their solar panels produce rather than selling it.

Technology mandates, such as features in inverters to ensure there isn't a massive and sudden drop off of solar electricity flowing into the grid, also have helped to minimize disruption to the grid. Inverters, as the bridge between solar panels and the grid, play a critical role in voltage and frequency regulations and communicating changes in them to grid operators.  Germany has a set of grid codes that dictate the inverter requirements for various sizes of solar systems.

Some of these inverter functions are under consideration for use, or for becoming part of interconnection requirements by utilities and grid operators in the United States. That discussion is underway as part of the IEEE 1547 standards-setting process.  

In 2013, Germany launched a small program to subsidize energy storage installations that was designed to see how pairing batteries with solar panels could help homeowners manage their electricity production and consumption. For example, they could store the solar electricity during the day and use it at night. The €25 million program is also meant to support battery technology development within Germany. But its scale has been too small to contribute to grid stability, Czajkowska said. The program is tapped out already and no new funding is forthcoming at the moment.

While the grid remains in a good shape for supporting solar energy development for now, its management practice will have to change as Germany plans to replace nuclear power with solar and other clean power sources. Energy storage will play a part, as will electric pricing designs that shape how much solar energy will be sold into the grid.  

"A lot of countries are looking at what might happen when renewable energy generation approaches 20 percent," Czajkowska said. "There are no silver bullets."

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