Flexible power use and smarter planning could cut Germany’s grid expansion costs – report

Germany could cut the cost of expanding its distribution grids by better tapping into flexible electricity consumption and building it into network planning, according to a report by think tank Agora Energiewende. Operators of these networks, which deliver power to homes and businesses, could save around 66 billion euros of the roughly 250 billion euros that expansion would cost by 2045 with traditional planning and development, the report found. 

The biggest lever for cutting costs is to use existing lines more effectively, Agora Energiewende concluded. “The guiding principle for grid planning should be: innovation where possible, expansion where necessary,” said the think tank’s head, Julia Bläsius. 

For the short and medium term, the authors recommended adding battery storage next to large renewable projects, as well as building grid connections for less than the maximum output of wind and solar plants. They argue that, for the most part, solar and wind plants would not feed their peak output into the grid. While the plants would need to be curtailed when this does happen, the authors said the approach would significantly cut expansion needs, as distribution grids are currently planned to absorb peak loads.

In the long term, the biggest benefit would come from flexible electricity consumption, for example by heat pumps, home storage systems and electric vehicles. Their potential has largely been overlooked in grid operators’ planning, Agora Energiewende said.

In theory, grid operators already have the power to throttle electricity supply to EVs and heat pumps to protect the grid. However, this has been difficult to implement in practice, Handelsblatt reported. Moreover, consumers should first be encouraged to voluntarily shift their electricity demand to match grid conditions, Agora Energiewende electricity project manager Mareike Herrndorff told the business daily. Handelsblatt added that it is currently not attractive for grid operators to digitalise and introduce smart solutions, because the more new kilometres of grid they build, the more money they earn. The savings that would result from less grid expansion would therefore not benefit the grid operators, but rather the electricity customers.

Bläsius called on the government, the federal network agency BNetzA and grid operators to “urgently promote innovative and more cost-effective alternatives and embed them in their planning.” The government earmarked 6.5 billion euros in 2026 on lowering grid fees.

Germany’s grids have struggled to keep pace with the expansion of renewable sources, leading to more occasions where wind and solar power has to be deliberately throttled to prevent grid overload. One way to reduce this strain is through dynamic electricity and grid tariffs, which reward consumers with low prices for using electricity when it is plentiful or grid capacity is underused. However, Germany has long lagged behind in the installation of smart meters, which are needed for flexible power use and billing.