Biomass wind-turbine-solar-panel-globe_light

Published on April 16th, 2014 | by Dr. Karl-Friedrich Lenz


New Merit Order Ideas

April 16th, 2014 by  

Originally published on Lenz Blog.

I have written extensively about the fact that the market order for electricity in Germany is broken. A search with the term “merit order” brings up those posts.

These questions are complicated. With this post, I will try to make a very simple point:

“Merit” should not be based simply on price.

Even right now, that is true in part. The German Law on Priority for Renewable Energy says in Article 8 that electricity from renewable sources needs to be bought with priority, irrespective of price.

That is a very simple order with only two elements. Renewable beats everything else.

But one could very well imagine a more detailed merit order. I will show one example right now. It shows my personal ranking. Other people may have different ideas. But showing my idea will make the concept clear.

I’ll do so in two steps. The first step shows a very rough order. In a second step, I will go into more detail.

1. Rough Merit Order

I agree with the present legislation that renewable energy from all sources gets priority over everything else.

On second place comes nuclear. I don’t think that the dangers from radiation caused by nuclear accidents are as severe as the dangers caused from firing fossil fuel. Obviously, a lot of people will disagree with that. And anyway, nuclear in Germany will be phased out over the next decade, so this entry in the order will disappear completely eventually.

And fossil fuel (all sources) has no merit at all, so it deserves a place firmly at the bottom of the scale.

2. More Detailed Merit Order

There are a lot of renewable options. How should one decide on their relative merits?

I am not very sure about this right now. But the big picture is that the transition to renewable energy needs to process as fast as possible. To achieve that, the most important thing is to get prices down for technologies that are still more expensive than others.

For example, onshore wind is already very successful in Germany, but offshore wind development is still behind schedule and still much more expensive than onshore wind.

Therefore, offshore wind should get priority over onshore wind. All things equal, that will help offshore wind get to scale faster.

Note that this leads to higher average prices now, since it gives priority to the technology with higher costs. But it leads to a faster transition in the long term and therefore to saving more fossil fuel costs faster in the future.

For example, solar is still more expensive than onshore wind and will stay so for another couple of years before it becomes the cheapest option. Therefore, solar should get priority over onshore wind right now.

Firing fossil fuel has no merit at all. But the damage to the climate is different for gas, hard coal and lignite. It is also different depending on whether it is cogeneration (using the heat for other useful purposes like heating buildings or water) or not. The way to decide this would be to calculate the CO2 emissions per unit of useful energy, and put the worst alternatives at the very bottom of the list.

3. Prices

Once a policy decision has been made on a detailed merit order, the question is left who gets paid how much. The present way of dealing with this is broken. It makes it impossible to operate fossil fuel plants with a decent profit. That’s a problem since fossil fuel plants will still be needed for a couple of decades as backup. And it’s also a problem since in the future people will make coal and gas from renewable sources. There’s nothing wrong with firing gas if you make it from excess wind power in the first place. There is no problem with firing coal if you make the coal from present day biomass, as opposed to fire fossil reserves.

This post is not the place to discuss that in detail. But I think that the system needs to make sure that everybody gets paid a fair price that is enough to cover costs and a fair profit. The way to do this would be to have everybody bid based on the sum of their fixed and marginal cost, and pay everybody who gets to sell under the new merit order based on these bids. More on that here
Get CleanTechnica’s 1st (completely free) electric car report → “Electric Cars: What Early Adopters & First Followers Want.”
Keep up to date with all the hottest cleantech news by subscribing to our (free) cleantech newsletter, or keep an eye on sector-specific news by getting our (also free) solar energy newsletter, electric vehicle newsletter, or wind energy newsletter.


Tags: , , ,

About the Author

is a professor of German and European Law at Aoyama Gakuin University in Tokyo, blogging since 2003 at Lenz Blog. A free PDF file of his global warming science fiction novel "Great News" is available here.

  • Will E

    I do not get this.
    Solar and Wind is now the cheapest power.
    next year start up in the EU of Solar Panel System for free.
    will be in short time the biggest multinational power provider.
    you do not pay for the hardware, but pay for the power you use.
    you do not pay for the utility, you pay for the power you use.

  • JamesWimberley

    The merit order is the list of generators in front of the grid manager as she balances shifting demand with power supply over the day, minute by minute. Classically. it’s based on short-run marginal cost. This is zero for wind and solar so they come first. The pure merit order has in practice to be tweaked because of different ramping abilities, but that’s not relevant here.

    Karl-Friedrich wants to tweak the merit order to reflect long-run strategic concerns, as is done with FITs. This makes the whole idea incoherent and arbitrary. If you want to subsidise offshore wind to bring it down the learning curve, fine. Give it a higher FIT – as is being done. Onshore and offshore wind have the same zero marginal cost and there’s no reason to despatch or curtail one ahead of the other.

    Once you are in to fossil generation, the merit order should include consideration of carbon emissions. The way to do this is a carbon tax or cap, which the EU already has – and should tighten.

Back to Top ↑
  • Advertisements

  • Top Posts & Pages

  • Cool Cleantech Events

    Low Voltage Electrification Event, April 25-27. Detroit, Michigan (US)
    Delve deep into the benefits and challenges associated with EV power supply.

    Offshore Wind Market Development USA, May 11-12, Boston, Massachusetts (US)
    Network and establish your business in one of North America’s largest energy industries.

    Energy Storage USA, June 15-16, San Diego, California (US)
    Only event in the United States focused exclusively on the commercialization of storage.

    More details are on: Cleantech Events.

  • Advertisement

  • CleanTechnica Electric Car Report

    Electric Cars Early Adopters First Followers
  • Tesla Model 3 Review by EVANNEX

    Tesla Model 3 Review from EVANNEX
  • Tesla Model 3 Exclusive Video

    Tesla Model 3 Video
  • Tesla Model 3 Exclusive Pictures

    Tesla Model 3 Video
  • Tesla Model X Review #1 (Video)

    Tesla Model X Review from new owners Zach Shahan
  • Tesla Model X Review #2 (Pictures)

    Tesla Model X Review from Kyle Field
  • Tesla Model S Long-Term Review

    Tesla Model S Long Term Review from Kyle Field
  • Nissan LEAF Long-Term Review

    Nissan LEAF Long Term Review from Cynthia Shahan
  • Interview with Michael Liebreich

    Interview with Michael Liebreich
  • Interview with Akon (Teslas & Solar)

    Interview with Akon Tesla Model S Tesla Model X Solar Power Africa
  • Interview with Dr Nawal Al-Hosany

    Interview with Dr Nawal Al-Hosany
  • Interview with Gro Brundtland

    Gro Brundtland
  • Interview with President of Iceland

    President of Iceland Ólafur Ragnar Grímsson
  • Interview with Nick Sampson

    Faraday Future VP Nick Sampson
  • Interview with Dipal Barua

    Dipal Barua 1st ZFEP WInner
  • Interview with Jonathon Porritt

    Jonathon Porritt
  • Interview with Clint Wilder

    Interview with Clint Wilder
  • Interviews with Solar Impulse Pilots

    Bertrand Piccard Andre Borschberg
  • Check out more CleanTechnica Videos.

  • Join The Solar Revolution!

    Edison-solar-energy solar-energy-spill-nice-day
  • Cost of Solar Panels

  • Search the IM Network