Berlin (energate) - Stefan Kapferer, CEO of the transmission grid operator 50 Hertz, expects the new laws to speed up the process of grid expansion. On the other hand, there could be bottlenecks in components, as Kapferer explains in an interview with energate. He also takes a look at the security of supply in the coming winter and comments on the topic of Netz AG.
energate: Mr Kapferer, last year was marked by major challenges in terms of security of supply. What is your summary now - at the beginning of March?
Kapferer: The winter is not quite over. But there is no doubt that we have come through the past few months very well. The supply crisis feared by many has not materialised. On the other hand, we see a continuing price crisis and, due to the coal-fired power plants that have returned to the market, greater challenges in the climate crisis.
energate: Despite some prophecies of doom, there were no blackouts. Were the fears unfounded or were we also lucky?
Kapferer: We were well prepared. Basically, there was very good and targeted cooperation between the federal government, the energy suppliers and the grid operators. There was close coordination, for example, on the question of how much coal to keep in reserve, how many power plants to put back on the market or how we could make better use of the power lines. That was a success factor. In addition, energy consumers have saved not only gas but also electricity. Five per cent less electricity demand has relieved the pressure on the grids, especially at peak times. The economy, but also the citizens, have made an important contribution to this.
energate: What contribution were renewable energies able to make to the supply in 2022?
Kapferer: On 58 days in 2022 we had more than 100 per cent renewable energy in our grid area, and over the year we covered two thirds of our load, or 65 per cent, with renewable energy. That is huge. We also see that with higher shares of renewable electricity, prices on the exchange have come down significantly.
energate: What about congestion management last year? Have we paid dearly for security of supply?
Kapferer: There is no doubt that the redispatch costs are too high. However, 2022 was an exceptional year due to the high electricity exchange prices. I am confident that the costs will stabilise this year. The possibility of making greater use of the electricity grids will also contribute to this.
energate: In 2022, three German nuclear power plants still contributed to security of supply, but that will no longer be the case next year. Does this mean that the challenges will grow again?
Kapferer: We looked at different scenarios in our stress test. One involved too little generation capacity in Germany, the other too little redispatch capacity in the south of the country. Because of the latter, we argued in the stress test for the continued operation of the two nuclear power plants in southern Germany. If sufficient nuclear power from France is available again next winter and the storage lakes in Switzerland and Austria are regularly filled, we will have a high level of security of supply even without German nuclear power.
energate: There are calls for another stress test. What is your position on this?
Kapferer: We will carry out a demand analysis, as we do every year. This also includes the redispatch potential that we have to contract. This is an established process. It was also the basis for the stress test last year.
energate: Let's move on to the expansion of the grid: the German government has initiated many laws to speed up the process in the future. Have you already noticed any effects?
Kapferer: I am very confident about the approval procedures. I expect a real tsunami of approvals. Not this year, but from 2025 we will see much shorter approval times. Today it is usually six to seven years; in future it should be four to five years at most. On this point, the German government has clearly delivered. This is the first government to move from ambition to action. Now it is up to us to deliver.
energate: In your opinion, does this mean that the splitting of the German electricity price zone is off the table?
Kapferer: That is a political decision. But I think the discussion is different than it was five years ago. It has become clear that other EU countries also have problems with the 70% requirement for cross-border transmission capacity. In addition, as I said, the situation in this country with regard to grid expansion has improved significantly.
energate: The legal framework now supports grid expansion. But do you have enough staff and can you get the necessary technical components to speed up grid expansion?
Kapferer: As far as our own staff growth is concerned, I am confident. But we see bottlenecks with service providers. For this reason, we are now bringing some of the services that we used to outsource back in-house. The need for personnel will continue to grow, especially when we look at the 2023 grid development plan, which will once again significantly increase the requirements for grid expansion with the so-called climate-neutral grid.
energate: What about components such as cables and transformers?
Kapferer: There is a threat of even greater bottlenecks here. Cable manufacturers generally adjust their production capacities to growing demand, but this is only possible with a time lag. The situation is different for transformers and converters. 50 Hertz alone will need up to 250 transformers in the next few years. If you include the other transmission grid operators, there is a demand for 800 to 1,000 transformers for the German market alone. The industry can't meet this demand at the moment.
energate: Where are the transformers going to come from? They are needed, after all.
Kapferer: I am convinced that we need an industrial policy initiative in Europe. This does not necessarily involve subsidies for the development of production capacities. It would also be enough to enable manufacturers and clients to exchange information on the quantities they need to purchase. The current regulations in public procurement law restrict such communication processes. We need pragmatic solutions here.
energate: The financial requirements are also growing. Is there sufficient capital available for the future grid expansion?
Kapferer: Our business plan envisages investments of 8.7 billion euros over the next five years. That is more than double the previous five-year period. And this will continue. This makes it clear that we will continue to need additional equity. Our owners Elia and KFW are committed to providing this equity. But the return on equity set for the next regulatory period does not reflect the current situation on the capital markets. The Federal Network Agency is also aware of this, which is why there will be talks about this in the near future.
energate: Tennet has offered the German government talks about taking over its German grid business. The discussion about the uniform Netz AG has started again. How do you assess this?
Kapferer: You won't be surprised that I have my doubts about the state taking the helm in more and more areas of the energy industry. The model we have at 50 Hertz, with KFW as a minority shareholder and Elia as the main owner, is working well. Politicians sit on our board and have insight into our plans.
energate: Wouldn't it be possible to increase efficiency by merging the four transmission system operators?
Kapferer: Quite objectively, there is efficiency potential when four companies become one, regardless of the sector. However, a merger would also mean that the companies would first have to deal with each other for several years. We don't have that time with grid expansion. So we wouldn't be doing the energy transition any favours by setting up a national grid company.
energate: Another topic that politicians are currently addressing is the question of how to finance controllable reserve power plants. The German government has started a dialogue on this issue. What do you expect?
Kapferer: I trust above all that minister Habeck's announcement that we will get a decision this year is valid. As long as we don't have the reserve power plants, there can be no earlier phase-out of coal. We need a capacity mechanism. The energy-only market does not provide a secure framework for investors. If nothing else, the introduction of revenue skimming has meant that investors will be less confident in the future that they will be able to maintain high revenues in the electricity market.
energate: To what extent do we need replacement power plants?
Kapferer: The Federal Network Agency expects a demand of 30,000 MW. That seems realistic to me.
The questions were asked by Karsten Wiedemann and Christian Seelos.
