Electricity grid regulator aims to spur investments with higher interest rates

Germany’s Federal Network Agency (BNetzA) has decided to improve investment conditions for new electricity grid infrastructure by raising the equity interest rates for new projects by about 40 percent. The value defines what return companies are allowed to earn on their invested capital. Adjusted for tax effects, the regulated equity yield rate for 2024 would be 7.09 percent for new investments, the agency said. “We take into account the current development of the interest rate environment,” said BNetzA head Klaus Müller in a press release. “That is why we want to pay better interest on new investments and thus create noticeable incentives for investments by the network operators.” For the existing infrastructure, the interest rate on equity remains unchanged. “This differentiation protects households, commerce and industry from an unjustifiably high burden,” said the agency.

The equity interest rates have been an important point off discussion in past years, with the agency often warning that costs for grid users – consumers, industry or commerce – would increase with higher rates. Germany’s electricity grid must be expanded to ensure it is up to the task of switching away from fossil fuels towards more decentralised, intermittent renewable energy. With the goal of becoming climate neutral by 2045, more and more sectors in the country will depend on electricity as their main energy supply. However, building new powerlines has proved a fraught process, plagued by public resistance.