Germany introduces new gas and electricity grid rules to spur investments, lower costs
Clean Energy Wire
Germany’s grid regulator, the Federal Network Agency (BNetzA), has introduced a new set of rules for operators of electricity and gas grids in a bid to reduce costs for consumers and lower overall system costs of the energy transition. With its so-called NEST (Networks-Efficient-Safe-Transformation) process, the agency aims to make grid regulation “more effective and simpler” and cut bureaucracy. This regulation defines the risk and return profile of network operators.
According to a statement by the agency, operating the grid would become more efficient through the regulatory changes, which should also ensure that only “unavoidable” cost are added to grid fees.
Germany’s electricity grid requires substantial investments to absorb a growing capacity of renewable energy sources and enable the increasing electrification of economic sectors, driven by the rise of heat pumps, electric vehicles, batteries and other energy transition technologies. While the country’s roughly 900 distribution grid operators face billions of euros in costs to implement a more capable and digitalised grid, the BNetzA said it aims to prevent operators from earning excessive profits by passing on unnecessarily high costs to customers.
“We keep an eye on the interests of households, companies, and industry, who ultimately foot the bill,” said BNetzA head Klaus Müller. A key measure decided by the network agency is to continue the incentive regulation for gas and electricity distribution grid operators beyond 2027. BNetzA would set a revenue cap determining the maximum amount of money customers may be charged via network fees. The cap will then be updated for three years into the future, instead of the current five, which the agency said will allow it to reflect actual cost changes during the transformation more quickly. Transmission grid operators are exempt from the changes and regulated separately, the agency added.
Energy industry group BDEW criticised the network agency’s decision, arguing that it does not provide operators with a reliable investment framework. The NEST plan contains several “structural-methodological deteriorations” compared to existing regulation that would ultimately make it harder for companies to invest, commented BDEW head Kerstin Andreae. The lobby group said the regulator’s approach would deprive operators of funds that are needed to expand and modernise the grid.
Local utility association VKU likewise said the BNetzA’s proposal was “disappointing” and failed to address the challenges grid operators face today. “The detailed changes with respect to earlier drafts are not enough to incentivise the much-needed investments in distribution grids,” said VKU head Ingbert Liebing. The new plan would give utilities little leeway for adapting to rising costs, with compensation payments arriving too late to ensure operators can make necessary investments, the association added.
