Toward A More Democratized Energy World
A discussion with Jochen Schwill, CEO and founder of Next Kraftwerke, by Anne-Sophie Garrigou.
If Jochen believes it’s the right thing, he likes to convince others of the same. First it was co-founder Hendrik Sämisch to realize their vision of a Virtual Power Plant, then investors helped move the vision along. Today, Next Kraftwerke aggregates and sells electricity from almost 5,000 independent renewable energy generators all over Europe.
Where does the idea of Next Kraftwerke come from?
When Hendrik Sämisch and I were working on our PhD theses, we were wondering how the increasing share of intermittent renewable energy in the system could be balanced in the future. This is when we started thinking about flexibility and how we would be able to quickly balance the volatile influx of renewable energy.
Where does your commitment to sustainable energy come from?
In the beginning, we were not thinking explicitly about renewable energies as providers of flexibility. We even started the Virtual Power Plant (VPP) by hooking up emergency generators. However, the deeper we got into the matter, the more it became clear to us that renewables are the future — and not only from a business point of view. As citizens, we owe it to society to think about sustainable solutions. So, we started to think about connecting renewable energy units to our Virtual Power Plant and it turned out that they are great providers for flexibility. This shows that renewables are competitive and can level out the imbalances they cause.
What is your definition of a democratized energy world? And how is Next Kraftwerke contributing?
In the end, the key issue is participation. So, from our point of view, a democratized energy world is an energy world in which more and more players can participate. This development has already started. These days, it is not a privilege of huge energy companies to build power plants and produce power, because the costs to do that have drastically been reduced. It is not necessary anymore to spend billions of Euros on new power plants, as they are doing for example at Hinkley Point. Our mission is to provide the opportunity for smaller producers to take part in a market which has been inaccessible for them before, and we foster the expansion of renewable energy power plants by providing flexibility.
How would you explain the concept of your Virtual Power Plant to someone who never heard of it?
We digitally connect small- and medium-sized power producing as well as power consuming units and, in doing so, aggregate their performance. We then sell the power at the electricity markets and feed it into the energy system to stabilize the grid. To be clear, we do not own one single unit, but with our technology and the consent of the owners, we can ramp the units up and down as if we were a real power plant. To put it into perspective, we have aggregated an overall capacity of 3,400 MW. This is the capacity of two large coal-fired power stations. However, we are almost 100% renewable.
Now, let’s dig in a bit deeper into the flexibility issue. Roughly 1,000 MW of our capacity are flexible and we provide this flexibility to the energy system , just like a huge battery would do. That means, with our technology we can very quickly feed in power, let’s say if a shortage of wind and solar power occurs, but also, if there is too much power, for example when a storm brings in heavy winds, and the system needs to be relieved. We can do that, because we connect units that have flexibility. For example, every Combined Heat and Power unit (CHP) has flexibility, even the backup capacity unit in the local supermarket; most run-of-river hydropower stations have flexibility. Also, many power consumers can provide flexibility to the system if they are flexible when to consume power. In all of those cases flexibility is a byproduct. The units were not built to provide flexibility to the market. They primarily serve other purposes, producing power or heat or whatever. And this is where Next Kraftwerke steps in. We tap flexibility potentials for and with our clients, because they are usually too small to provide flexibility to larger systems like the grid on their own. Shifting production or consumption into times when flexibility is needed makes economic sense and contributes to more efficiency in the system.
How optimistic are you about meeting the demand for electricity using renewable energy by 2050 in Europe?
We are optimistic it is going to work out. Photovoltaics and wind are already the cheapest producers of energy. Why should anyone in 2050 think about other options? We also try to do our share. Since batteries are, still, very costly and thus, storing power is not yet an affordable option in many cases, we keep focusing on providing flexibility and shifting electricity to keep the grid stable. This way we want to support the feed-in of renewables, fuel their expansion and thus, contribute to a greener future in energy.
What would you say is unique about your business?
It is not cheap to build new power plants. And it costs millions of Euros to build battery storage. STEAG, a German utility, invests 100 million Euros into six battery systems amounting to 90 MW. In contrast, we provide a very cost-efficient way to provide flexible power. We were able to aggregate hundreds of megawatts of flexibility for less than 10 million euros.
What were the biggest initial hurdles to building Next Kraftwerke and how did you overcome them?
Legislation was a huge hurdle in the beginning. When we started, there was no legislation regulating what Virtual Power Plants were allowed to do and what not. Luckily, in Germany, legislation changed in our favor with Germany’s 2012 Renewable Energy Source Act (EEG), since then renewables were allowed to participate in the market and offer their flexibility for the first time. This is also why legislation is always a key factor for us when thinking about expanding to other countries.
What do you attribute your success to?
To our team! When the EEG changed in 2012, we became an energy trader overnight. We figured out a way to do it and now we are experts in short term trading. We were able to do it, because we are not afraid of change. We actually like it. We constantly work on further establishing the flow of electricity, data, and ideas to find the best solutions for our clients, a sustainable business and 100% green energy in the future.
How do you believe evolving technology will impact the way we do business in energy over the next 10 years?
10 years ago there wasn’t even an open market for control reserve. So, I am very cautious to predict what will happen in the next 10 years. However, I am sure whatever will happen, we will adapt to it.
What do you know today that you wish you would have known when you first started Next Kraftwerke?
That’s a tough one! From an energy trader’s perspective, I would of course have liked to know the market prices of the future (laughs). Generally speaking it’s key to approach potential customers but also other business partners with a strong conviction that your idea is the right one. Hesitating is not a business strategy. At the same time it’s really difficult to stand up for your idea without having any proof of success. So I guess I would like to have known that what we do today — running a Virtual Power Plant with almost 5,000 networked units — will work out just fine. It would have made many meetings a lot more relaxed.
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