March 15 (Bloomberg) -- Poland’s plan to avoid power blackouts by limiting Germany’s growing renewable electricity flows through its territory may help erase the biggest price gap between the neighbors in at least three years.
Baseload, or round-the-clock, supplies of German power for next-year delivery were an average 13 percent more expensive than Poland’s in the past year, the biggest premium for the comparable period since at least 2009, according to data compiled by Bloomberg. Poland’s plan to put transformers on its 467-kilometer (290-mile) border with Germany may regulate flows, freeing up its own capacity for buying and selling, according to PSE Operator SA, Poland’s grid manager.
Germany is being forced to turn to Polish and Czech grids to ship record electricity output from wind turbines in the country’s north to industrial users in the south. Flows via Poland intensified since Chancellor Angela Merkel’s decision a year ago to close the country’s oldest nuclear plants after the reactor meltdowns in Fukushima, Japan. Poland’s grid says the transformers will protect power lines from overload at the same time as tripling electricity export capacity.
“If the capacity increase is sustained, Polish prices would quickly converge with those in the Czech Republic and Germany,” Michal Wilczkiewicz, a trader for Fortum Oyj in Warsaw, said in a phone interview.
German power for next-year delivery was 1.40 euros ($1.83) a megawatt-hour more expensive than its Polish equivalent today, compared with an average of 7.03 euros during the past 12 months, broker data compiled by Bloomberg show. The gap was 8.98 euros on Nov. 21, when PSE Operator SA, Poland’s network manager, said it would have no capacity to export electricity to Germany available to traders for the six months from May.
104 Billion Euros
Europe needs to invest 104 billion euros in its extra high voltage power lines over the next 10 years to avoid bottlenecks, 80 percent of which are related to renewable sources such as wind and solar power, according to the European Network of Transmission System Operators for Electricity, which represents network managers in Brussels.
Increased wind production in Germany on Feb. 24 left no capacity available to trade on a cable linking the country with Sweden, according to grid operator TenneT Holding BV. The Czech Republic’s grid is at risk of failure after unscheduled flows from Germany rose as high as 3,500 megawatts, more than three times the usual value, according to its operator. Belgium in 2009 installed the so-called phase shifting transformers on its links to stabilize supply as generation from wind and sun, which depends on favorable weather conditions, increased.
Unscheduled Power Flows
Poland handles as much as 2,000 megawatts of unscheduled power from Germany and needs phase shifters to improve the system, Grzegorz Tomasik, management board member of PSE Operator said in a Feb. 22 interview. The flows are equal to about 11 percent of Poland’s demand last year, grid data show.
“Recent years have shown a steady increase in unscheduled flows of about 5 percent annually” mainly from wind farms in northern Germany, Jerzy Dudzik, the head of PSE Operator’s system management department, said by e-mail yesterday.
The transformers would also allow the grid to offer the capacity to import power to Poland now blocked by German flows, boosting trade, Tomasik said. A tender will be announced by April, he said. Poland plans to put the phase shifters on its two cable connections with Germany in two to three years, more than tripling exports to over 2,000 megawatts and boosting imports by about 500 megawatts, PSE Operator said. 1,000 megawatts is enough to supply about 2 million European homes.
Elia System Operator NV, the manager of Belgium’s grid, installed the transformers on its external connections as greater variability of energy flows in Europe’s interconnected markets required measures to maintain stability of supply.
‘Act Like Taps’
“Elia has put in place phase-shifting transformers, which act like taps and allow electricity flows to be distributed between a larger number of connections on the Central West European grid,” the company said in its 2010 annual report.
Germany installed a record 3,000 megawatts of new solar panels in December, according to the Bonn-based Bundesnetzagentur, the network regulator. Output from the nation’s wind turbines reached a record 8 terawatt-hours in December, the BDEW utility group said Jan. 11. The country plans to get at least 35 percent of its electricity from renewable sources by 2020, compared with 20 percent last year.
“Phase shifters won’t harm the development of renewable energy in Germany,” Tomasik said.
Merkel’s decision to shut Germany’s reactors by 2022 and replace them with fossil fuel-fired plants and renewable capacity will require at least 4,500 kilometers of extra power lines, according to Economy Minister Philipp Roesler. In January, TenneT TSO GmbH, a German grid operator, said it was forced to tap as much as 1 gigawatt of capacity from fossil-fuel plants in Austria in December to help stabilize its network amid high winds in the north and peak demand in the south.
Risks of Blackouts
“If Poland goes ahead and installs phase shifters on the border and Germany fails to improve its grid by then the risk of transmission failures and blackouts would increase, all other things being the same,” Paolo Coghe, a senior European power analyst at Societe Generale SA in Paris, said by phone.
The shifters may boost power plant operating costs as companies have to react more quickly to movements in supply, said Pawel Smolen, the Berlin-based head of power-production asset management at Sweden’s Vattenfall AB, said by e-mail.
“With the higher number of halts and restarts and load shifting from high to low more often, the costs will rise and that is likely to affect the final price,” Smolen said.
The Czech Republic may also have to resort to phase shifters if it continues to experience overloading from German flows, Eva Vitkova, a spokeswoman at the Prague-based CEPS AS, the Czech electricity network operator, said by e-mail.
The nation plans to invest about 2 billion euros in its grid rather than limit flows, Prime Minister Petr Necas said in Berlin Feb. 10. The country’s network was at risk of failing in November and December because of the flows, CEPS said Jan. 10.
“If phase shifters are installed, German prices may become much less predictable and more volatile,” Tomasz Krzyzewski, director of power trading at the Polish unit of Mercuria Energy Group Ltd., said by phone. “If more cross-border capacity is available Polish power prices should converge with Germany.”
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