News
15 Jul 2021, 17:19
Edgar Meza

Poor power grid investment conditions could hobble energy transition, German utilities say

Updates with original proposal for reducing equity interest rates for investments in the electricity and gas grids by the Federal Network Agency (BNetzA)

Clean Energy Wire

German utilities have warned that “inadequate investment conditions” for the expansion and upgrading of the country’s power grid could endanger the country’s energy transition. Industry association BDEW said the grid agency (BNetzA) considered a historically low remuneration for grid investments that are essential for Germany’s energy transition.

On Wednesday, the BNetzA published its proposal for lowering the equity interest rates for investments in the electricity and gas grids. The reduction was reflecting the low level of interest rates on the capital markets, the regulator argued. BNetzA president Jochen Homann said that they would be ready to review the new interest rate in the case of changes in investment conditions, but added: "The returns of the network operators are paid by the network users, i.e. consumers, industry and commerce. These must not be unnecessarily burdened."

“The BNetzA does not take into account the fact that the market risk premium expected by investors has increased significantly as a result of the financial market crisis,” the BDEW said. “The fact is that modern networks cannot be had at cost price,” commented BDEW chair Kerstin Andreae. “Only a consistent network expansion ensures that green energy can always get to where it is needed. This will require billions in investments. The necessary grid investments must remain attractive for investors and capital providers. In contrast, insufficient investment conditions for the grid expansion and upgrade would jeopardise the energy transition.” It is crucial that operators focus on the expansion and upgrading of the grid between 2023 and 2028, she added. The BNetzA’s equity cost proposal, however, is far from what investors expect, Andreae argued.

Germany's shift from fossil fuel and nuclear power will only succeed if the infrastructure exists to support a very different kind of energy system. To date, the country's electricity grid is not up to the job of making full use of all the renewable power it generates - and it will have to cope with a lot more in the future. With the goal of becoming a climate neutral nation brought forward to 2045, more and more sectors will depend on electricity as their main energy supply. But building new powerlines has proved a fraught process, plagued by public resistance. An underdeveloped grid is already costing consumers hundreds of millions of euros.

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