German regulator warns: Market splitting threatens without rapid grid expansion

Germany has long faced a situation in which the expansion of its transmission system lags behind the growth in installed renewable capacity. The four transmission system operators therefore regularly submit plans for further development to the German regulator. The regulator is urging them to expand transmission capacity more quickly instead of relying on redispatch as a short-term fix. A prolonged shortage of transmission capacity could threaten the integrity of Germany’s single bidding zone.

The slow expansion of the transmission system is one of the main obstacles to the transformation of Germany’s energy sector. While installed solar and wind capacity has grown rapidly in recent years, grid development has moved more slowly. Projects to expand the transmission system can take as long as two decades from planning to completion.

Last week, Germany’s grid regulator, the Federal Network Agency, launched a consultation on the development plan for 2037 and 2045. According to the regulator, the four transmission system operators submitted a total of 159 projects to strengthen the grid. In its preliminary assessment, the regulator gave preliminary approval to 118 measures. It rejected the remaining roughly 40 projects, saying they would not make a significant contribution to strengthening the transmission system.

"Secure and reliable electricity supplies, including good interconnections with our European neighbours, are essential. At the same time, we must keep costs under control. This is the balance the Federal Network Agency aims to achieve with its current proposal," said Klaus Müller, president of Germany’s grid regulator.

According to Müller, further expansion of the grid at the highest voltage levels is essential to advance the transformation of the energy sector. It is also necessary to ensure security of supply and meet climate targets.

The plans also include additional connections for offshore wind farms, with up to eight further projects proposed. According to the regulator, these are necessary for Germany to meet the targets set out in its offshore wind development plan.

Prolonged overuse of short-term measures could have major consequences

The regulator also warned against relying on short-term measures over the long term, according to Clean Energy Wire. Specifically, it cited the extensive use of redispatch, whereby insufficient internal transmission capacity in Germany leads to situations in which generators that could otherwise sell their output on the market have to be curtailed, while more expensive generation is brought online elsewhere.

The regulator said the European Union could classify these bottlenecks as structural, potentially leading to the breakup of Germany’s single wholesale market into multiple bidding zones.