Can large-scale photovoltaic plants offer attractive long-term electricity deals to industrial consumers whose load profiles fluctuate by tens of megawatts within minutes? The Applied Systems Engineering division of the Fraunhofer Institute for Optronics, System Technologies and Image Exploitation (Fraunhofer IOSB-AST) examined this question in an analysis for German steel manufacturer Stahlwerke Thüringen GmbH (SWT). The study aimed to identify the threshold price at which sourcing solar power via a long-term “pay-as-produced” power purchase agreement (PPA) becomes economically viable for an energy-intensive operator.
IOSB-AST points to volatile spot market prices, geopolitical uncertainty, and regulatory shifts as key factors complicating long-term cost planning for energy-intensive industries. In this context, long-term PPAs with renewable generators are seen as a “promising approach,” enabling predictable procurement costs over terms of 15 years or more and partially insulating industrial consumers from short-term price fluctuations.
However, aligning such contracts with the operational reality of a steelworks remains challenging. SWT’s load profile can vary by up to 60 MW within minutes, meaning a single 15-minute settlement interval may include both electricity consumption and feed-in. At the same time, long-term market uncertainty adds further complexity. According to Steffi Naumann, group leader at Fraunhofer IOSB-AST, this requires “a high-resolution, scenario-based methodology” to determine a reliable threshold price.
To capture short-term variability, photovoltaic generation was simulated at one-minute resolution. Standard global solar radiation datasets, typically available only at coarser intervals, were insufficient. While some large-scale projects rely on on-site irradiance measurements over extended periods, IOSB-AST instead used data from a remote solar radiation observatory. The institute derived minute-level stochastic patterns from 10-minute measurements and applied them to local weather conditions, enabling “realistic interpolation and robust simulation of actual feed-in profiles,” it said.
A sensitivity analysis was then carried out jointly with SWT across multiple scenarios, weighted by probability of occurrence. Depending on the assumptions, the marginal cost threshold for project viability ranged from €20 ($23.2)/MWh to €70/MWh (€0.02–0.07/kWh). IOSB-AST did not disclose the final threshold price determined for SWT.
The analysis identified negative electricity prices as the key economic risk for the steel producer. This could be mitigated through contractual provisions allowing photovoltaic curtailment without compensation during negative price periods.
For SWT, battery storage is considered a potentially viable option—assuming continued spot market volatility—though primarily for arbitrage rather than increasing solar self-consumption. From this perspective, storage operates independently of the PPA structure.
Stahlwerk Thüringen produces structural steel using an electric arc furnace route followed by hot rolling. The company aims to achieve climate-neutral steel production by 2040 and to increase the share of renewable energy in its operations.
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