Distributed and flexible capacity in Germany – Will prosumer or utility scale business models dominate?

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Maturing technologies, high retail power prices, and a replacement of baseload by intermittent capacities will drastically alter the functioning of power markets. These trends create opportunities for new business models, but also threaten existing ones. Understanding them early on can provide a competitive advantage for investors, utilities and innovators over the next decade.

Many developments favour the “prosumer”: Decentral renewables are supported by high retail prices and falling costs of storage and solar PV. Small-scale CHP with an interesting self-consumption business case have additional potential to participate in balancing markets through aggregators, and demand side response can profit from increasing price volatility and regulatory incentives for peak shaving.

On the other hand, maturing technologies can offer flexibility on a utility scale: Large-scale batteries and pumped storage can benefit from price arbitrage and provide balancing services. Peaking plant may benefit from rising price volatility and vNNE, and flexible CHP plants with power-to-heat conversion and heat storage might be-well positioned to benefit from price volatility.

Will utility-scale technologies become the norm for providing flexibility over the next decades, or will distributed technologies dominate?

Assessing the market potential of these options needs to go beyond the wholesale power market and account for revenue streams such as balancing markets, vNNE and self-consumption.

This report presents first results on selected business models answering questions such as:

  • When will decentral technologies such as CHP, solar and batteries reach grid parity and how much build-out potential do they have?
  • Which combination of technology and business model has still potential to be built at utility scale?
  • How will these developments individually affect the various power markets?
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