Germany's grid operators achieve very high returns amid sluggish grid expansion – analysis

Distribution grid operators in Germany are achieving very high returns while grid expansion remains a major weakness of the energy transition, according to an analysis by energy market association BNE. Grid costs could be about three billion euros lower per year if the operators’ returns would be reduced to a more “appropriate” level, BNE said. Industry representatives said the analysis failed to correctly account for details of Germany's commercial law. 

Customers cannot choose their local distribution grid operator and pay the grid fees that apply in their region. The “grid monopolists’” profits clash with the high grid fees, BNE said, calling for a debate on market reforms to end the “risk-free dream returns” during a “massive grid crisis” in which customers often face long waiting times for new connections. Besides slow electricity network expansion, operators have also failed to implement digitalisation, harmonise bureaucratic standards and ensure the widespread use of smart meters, the association said. BNE called for “a stronger focus on regulating real profits as well as the actual services rendered by the grid operators,” requiring greater transparency and national standards for grid connections. 

BNE, which advocates for a more decentralised and flexible energy system, analysed the country's 18 largest distribution grid operators, which cover roughly half of all customers. It found that their market-share-weighted return on equity averaged more than 30 percent in 2024, with companies like EWE (61%) or Westnetz (45%) achieving even higher returns. The association said that the high returns are not a statistical outlier but a recurring feature of favourable market structures, the association said. The average return for companies listed in Germany’s stock market index DAX by contrast was 12 to 15 percent in 2024. “There is no other industry in Germany in which the market leaders are nearly this profitable,” the association said. 

Energy company E.ON, which owns Westnetz and other distribution grid operators, said the analysis’s was “distorted,” as its grid operators’ returns are calculated differently from others under commercial law. It added that the parent companies have to pay taxes on its subsidiaries’ profits, public broadcaster ARD reported. 

Germany’s slow electricity grid expansion is a key challenge for the further expansion of renewable energy sources. Economy and energy minister Katherina Reiche, a former employee of E.ON-subsidiary Westenergie, plans to curb the construction of new wind and solar power installations in regions where insufficient grid capacity frequently leads to costly curtailing and re-dispatch measures to stabilise the grid. Critics warn this could undermine investment certainty in the energy transition, and instead call for performance targets for grid operators to drive the required infrastructure buildout.