Let’s talk about Germany’s Innovation Tender (InnoAus) – Part 1
In Germany, as well as in other countries, we are currently experiencing a surge in the demand for large scale Battery Energy Storage Systems (BESS). Additionally, the combination of renewable generators and BESS into Hybrid Power Plants is increasingly coming into focus. This approach aims to address the flexibility requirements of modern energy systems with high renewable energy shares and to develop power plants with sustainable business models.
Financing BESS and especially Hybrid Power Plants is still complex and challenging. Financiers are often hesitant when the business models rely solely on merchant activities. Investors also feel more comfortable with “contracted” revenues or explicitly require them.
To overcome this obstacle and incentivize investments to reach its renewable energy expansion targets, Germany offers the Innovation tender as a possibility to support such investments with a support scheme. However, this support does not come without obligations.
In this article, we provide an overview of the German Innovation Tender (InnoAus), discuss its positive and negative aspects, and show you how optimizers like CAMOPO can increase the performance of such assets.
What is the Innovation Tender?
The Innovation Tender by the Federal Network Agency (Bundesnetzagentur (BNetzA)) is a funding instrument to support the integration of BESS and renewable energies (RE). These tenders take place twice a year, on May 1st and September 1st, unless rescheduled by BNetzA.
What are the objectives of the InnoAus?
InnoAus is designed to promote the combination of various RE systems and BESS. This initiative aims to make the grid infrastructure more efficient, smooth out peak loads from photovoltaic and wind power, and enhance the stability of the power grid.
What are the requirements for participation?
To take part in the InnoAus, certain criteria must be met:
• Combination of Systems: Combinations of various renewable energy (RE) systems and systems for converting stored energy into electricity are supported. At least one of the systems must use wind or solar energy.
• Minimum Capacity: The combined capacity of the systems must be at least 1 MW and must be fed into the grid through a common connection point.
• New Systems: The systems must not have been commissioned at the time of bid submission.
• Battery Storage: BESS may only draw electricity from the associated RE system and not from the grid.
How to take part? What’s the bidding procedure?
Bids must include specific information, such as the energy source, the bid date, the bid value, and the bid quantity (at least 1 MW). Incomplete or incorrect bids will be excluded.
Special features of the InnoAus:
The funding is provided in the form of a sliding market premium which can be seen as a guaranteed “minimum price” for each MWh which is fed into the grid. Generating additional revenues with the asset is possible.
The graph above depicts the hypothetical calculation of market premium. If a tender participant was awarded for InnoAus (i.e. with the 2024 weighted average tender value), this participant would have received market premium for the energy fed-in the grid, for the months between January and October at different values. Assuming that, this market participant commercialized its feed-in at solar market value each month (pink curve), market premium covers the difference between its tender awarded price and its commercialized price. For November and December, market premium does not apply since solar market value is above tender award level.
To receive the funding, specific requirements of the innovation call must be met and adhered to. These include:
• Charging the BESS from the grid is not allowed: This restricts some grid services, such as PRL (primary control reserve) or SRL negative (secondary control reserve).
• Mandatory BESS capacity with annual verification: BESS must have an installed capacity of at least 25% of the total capacity of the system combination. In addition, the energy storage capacity must be able to store at least two hours of the nominal output.
• Negative exchange electricity prices: In times of negative exchange electricity prices, payments are suspended.
• Implementation period of 30 months: Projects must be implemented within this period.
These special features make the InnoAus a challenging but rewarding instrument for plant operators which brings us to the point why Operational Optimization is a necessity to achieve the following:
- Compliance with requirements:
Projects taking part in InnoAus must meet strict technical and regulatory requirements mentioned above. For example, BESS may only draw electricity from RE system, and at least 25% of the total output must come from the BESS. This must be regularly verified by an independent environmental auditor. To meet these requirements, continuous monitoring and optimized energy management are recommended. - Flexibility and Adaptability
Optimized assets are better equipped to respond to changing market conditions and use various marketing options. This increases competitiveness and enables success in different markets. The ability to remain flexible is invaluable in a dynamic market environment. - Long-term Investment Security
A well-optimized asset can generate stable revenues over the long term and increase investment security. This is particularly important in a constantly changing energy market, where uncertainties and fluctuations are common. - Economic Efficiency
A specific aspect of the InnoAus is that it is not allowed to charge the BESS from the grid. Therefore, it is particularly relevant to sell the electricity generated by the RE system at the best possible time to optimally use the asset’s given flexibility. Additionally, feeding electricity into the grid during hours with negative prices should be avoided, as there is no entitlement to the market premium during these times.
Let’s break this last point down and go into more detail.
Let’s break this last point down and go into more detail.
As systems that make use of InnoAus are not allowed to draw electricity from the grid, the use of the BESS is limited to the intermediate storage of the electricity generated by the RE system. Furthermore, the asset’s participation in the balancing power market is also limited to products for which the BESS does not have to draw electricity from the grid.
Consequently, the optimization of such assets is primarily about using the BESS to shift the feed-in of RE generation to the times of the day when the highest sales prices can be expected in the energy market. As there is no entitlement to payment when electricity prices are negative, it is also essential to avoid feeding electricity into the grid at times when prices are negative and instead to temporarily store the RE generation in the battery.
A further optimization point can be to use the BESS to compensate for the given forecast error of the RE system and to assign higher priority to schedule reliability instead of relying on balancing energy.
All these points require precise planning and execution of schedules on the system. To accomplish that, weather conditions, energy market prices and the rules of InnoAus need to be continuously monitored and integrated. Moreover, physical characteristics and limits of the system (such as grid interconnection capacity, efficiency, BESS c-rate) as well as commercial framework conditions (such as BESS warranty conditions permitted number of cycles, average SoC to be maintained, etc.) must be always incorpo-rated into the operating strategy and decisions.
This is where software and algorithm-based optimization solutions come into play, which support the system operator and marketer in making data-based, optimized decisions based on the given parameters and thus increasing the profitability of the systems under the given constraints.
In conclusion, InnoAus presents a valuable opportunity for asset operators to enhance the performance and economic viability of their BESS and Hybrid Power Plants. Participation in InnoAus provides asset operators with access to a funding program and subsidies. These financial incentives can significantly strengthen its economic foundation which should make financing easier. Assets using optimization so-lutions like CAMOPO have a better chance of economic success, as they can adapt more flexibly to changing conditions.
You own a plant that is operated as part of InnoAus or you’re planning to take part in it with your project. And you are interested in exploring which optimization is possible?
Let us talk and schedule a meeting with our experts today.