Hans-Werner Sinn

Nationalökonomie & Finanzwissenschaft

Ifo Viewpoint

Ifo Viewpoint No. 154: Putin and Flickering Power

Munich, 17 March 2014

The unresolved conflict in Ukraine not only poses foreign policy and security risks. The escalation in eastern Ukraine is also endangering Germany’s oil and gas supplies, which in turn threatens its energy turnaround since Germany’s new energy policy cannot be implemented without Russian gas. Why? Because of the inconstancy of wind and solar energy. Both sources of energy require a technology to smooth out the vagaries of their power output. This task can ultimately only be performed by gas-fired power plants co-existing alongside wind and solar energy.

Ifo investigated whether there is any way around this problem. Using the figures for wind and solar energy effectively supplied during all 8,760 hours of 2011, we calculated the storage capacity required to smooth out the output fluctuations. The installed nominal output of both power sources amounted to 54 Gigawatts (GW) in that year. Their combined output reached up to 27 GW at given times, but at others it dropped to 0.5 GW, giving an average power generation of 7.3 GW. The assured output available during 99.5 per cent of hours amounted to only 0.9 GW.

To make the average output reliably available for consumption and to bring up the 0.9-GW assured output as close to the average value as possible, a storage technology is absolutely essential. The most efficient method currently available is pumped hydro storage. Around 3,300 pumped storage facilities would be required to achieve a complete smoothing of the power supply based on 2011 figures, which represents around 100 times the number of facilities currently existing in Germany. New storage facilities, however, are difficult to get built since they tend to provoke angry citizen protests. In Bavaria’s Jochberg area people raised their scythes in protest when only one such power station was to be built.

So what about smoothing only part of the “fluctuating power” instead of all of it? The results for this model are also sobering. To smooth four-sevenths of the average power output, around 440 pumped storage facilities would still be needed in Germany. This remains beyond the realms of the politically possible.

Alternatively, power could be stored in batteries. This would require 164 million battery packs of the type used in a BMW i3 – four times the number of cars of all stripes presently in existence in Germany. The one million electric cars that are supposed to be on Germany’s roads by 2020 would deliver a meagre 0.6 per cent of the storage capacity required. And those cars would not be able to drive on windless days of the year, to prevent their batteries from running out of power.

The storage problem can only be solved through the construction of natural gas storage facilities. Such facilities require less space, can be built on flat land and the production costs are much lower. With this technology power peaks are initially used to produce hydrogen. The hydrogen is then transformed back into methane gas, which the gas-fired power stations can use to generate power where necessary.

A problem yet to be solved, however, is energy loss along this storage path. Since the efficiency factor in this procedure is only a quarter, the cost of any power sent through the methanisation and gas-fired power plants would quadruple.

In short, it is ultimately much cheaper to buy gas from Putin’s gas traders, store it in Germany and then use it to generate power in gas-fired power stations when necessary to fill the gaps left by wind and solar energy. Putin gas costs around 3 cents per kilowatt hour, whereas gas from methane obtained from wind energy conversion would be at least six times as expensive, not including the costs of building the conversion plants. If the power were to be generated offshore it would be at least ten times as expensive.

The use of Russian gas is therefore the only solution that is halfway viable in economic terms. Under this scenario, the fluctuating power from wind and solar power is blended and smoothed with power from methane storage facilities that are replenished by Putin’s gas traders and then tapped as needed. Overall, this leads to a regular supply of energy – and it is our only option. All other alternatives are mere pipedreams.

But this gives rise to new risks. Germany’s security is already imperilled by its dependence on Russian gas, with a third of the gas currently used in Germany coming from or flowing through Russian territory. If we proceed to decommission our existing nuclear power plants as scheduled to rely entirely on wind and solar power, we will increase our dependence on Russia – and degrade the security of our power supply even more. This, in turn, will further impair Germany’s ability to act in foreign policy matters.

Do we really know what we are doing with our much-vaunted Energiewende?

Hans-Werner Sinn
Professor of Economics and Public Finance
President of the Ifo Institute

Published in German under the title “Putin und der Zappelstrom”, Wirtschaftswoche, No. 12, 17 March 2014, p. 37.