Britain and Germany saw unprecedented growth of variable renewable energy (VRE) in the last decade. Many studies suggest this will significantly raise short-term power system operation costs for balancing and congestion management. We review the actual development of these costs, their allocation and policy implications in both countries.
Since 2010, system operation costs have increased by 62% in Britain (with a five-fold increase in VRE capacity) and remained comparable in Germany (with capacity doubling). Within this, balancing costs stayed level in Britain (–4%) and decreased substantially in Germany (–72%), whilst congestion management costs have grown 74% in Britain and 14-fold in Germany. Curtailment costs vary widely from year to year, and should fall strongly when ongoing and planned grid upgrades are completed. Curtailment rates for wind farms have risen to 4–5% in Germany and 5–6% in Britain (0–1% for offshore and 15–16% for onshore Scottish farms).
Policy debates regarding the balancing system are similar in both countries, focussing on strengthening imbalance price signals and the extent that VRE generators bear the integration costs they cause. Both countries can learn from each other's balancing market and imbalance settlement designs. Britain should reform its balancing markets to be more transparent, competitive and open to new providers (especially VRE generators). Shorter trading intervals and gate closure would both require and enable market participants (including VRE) to take more responsibility for balancing. Germany should consider a reserve energy market and move to marginal imbalance pricing.