Consistency is the most important goal for any power grid, but in renewables-crazed Germany that kind of reliability is becoming a distant memory as the country struggles to cope with the volatility inherent to those more eco-friendly power sources. Berlin has rapidly grown its wind and solar power sectors through the use of costly government subsidies called feed-in tariffs, and in so doing has overloaded its energy mix with sources that can only contribute intermittently (i.e., when the sun is shining and the wind is blowing). Sure, these green suppliers don’t emit the greenhouse gases and local pollutants that a coal-fired power plant might, but at least with coal (or any other fossil fuel, for that matter) you know what you’re getting.
Now, as Bloomberg reports, German energy traders are having so much trouble keeping up with the price swings caused by intermittent upstart suppliers that they’re turning to algorithms to do their jobs for them:
The price movements in the nine-year-old intraday German power market are “about 200 times that of financial markets,” said Karl Frauendorfer, a professor of operations research at University of St. Gallen in Switzerland who has worked with electricity traders for almost 20 years. “The volatility makes it impossible for humans to efficiently comply with risk limits.”
…The intermittent renewable output has made traders increasingly focus on hourly or 15-minute electricity contracts to quickly react to changes in weather that alter the power supply. That’s increased the need for algorithmic computer programs that can do the buying and selling on their own. […]
“In the long run, it will be hard for companies to make profit in the intraday market without algorithms, computers will be faster placing orders and make better decisions,” Hendrik Brockmeyer, senior power trader at utility EWE AG, said by phone Tuesday. The company started using automated trading about a year ago. “It will become a necessity.”
But this is more than just a story of a profession having to lean on computing power to adapt to changing market conditions. The traders’ struggle is a symptom of a serious volatility problem for Germany’s grid. There are two sides to this. First, on cloudy, windless days, an energy mix too reliant on renewables will struggle to avoid blackouts. But, second, at times of peak renewables supply, the grid is overloaded, and that’s already proved a problem not just for Germany but also for its neighbors.
Because we lack cost-effective and scalable storage options, the inconstancy of renewables necessarily limits their share of an energy mix. Germany’s wind and solar power policy experiment isn’t just inflating household power bills. It’s also threatening grid stability—and it’s not just trading firms that are struggling to cope.