Germany seeks fairer grid charges. Households with solar panels will pay more

The transformation of the energy sector, with changing generation mixes and the growth of decentralised generation alongside energy storage, is raising questions about the needs of the power system. In many European countries, distribution grids in particular require substantial investment and changes to how they are managed. Maintaining and developing distribution grids is costly, and not only Czechia but also neighbouring Germany is considering the need to reform its payment system. Germany’s grid regulator recently presented details of a planned reform of network charges. These are also expected to become dynamic in the foreseeable future, incentivising generators and consumers to optimise their needs.

Financing the maintenance, and especially the development, of distribution grids is a sensitive issue, as it is often discussed alongside reform of the payment system. The transformation of the energy sector is increasingly prompting lawmakers and regulators in individual EU countries to consider potential changes to the way electricity distribution is funded. Discussions about changing the tariff structure are taking place, for example, in Czechia, as well as in Germany.

According to Germany’s grid regulator, the current system of network charges no longer reflects the current and future needs of energy supply. The regulator has therefore presented details of how electricity distribution charges in the country should change in the coming years.

"The aim of the new system of network charges is to increase cost efficiency and ensure a fair distribution of costs. Our objectives are to allocate costs where they arise; set a price for limited capacity; prevent the costs of managing grid congestion; promote flexibility; and limit the need for grid expansion," said Klaus Müller, president of Germany’s grid regulator.

Households can expect no major changes — at least those without their own generation

For around 40 million households connected to the low-voltage grid, the system should not change significantly, according to the regulator. Households will continue to pay fixed connection charges as well as variable charges based on their actual consumption. The situation is similar in Czechia. Some changes will nevertheless be made in Germany to the fixed connection charge.

Electricity consumers who also generate their own power and therefore use less electricity from the grid will pay higher fixed charges. This will mean they contribute more to financing the grids from which they can draw electricity at any time. Small plug-in solar systems, sometimes nicknamed balcony solar, will be exempt from this obligation. According to the regulator, the impact on prosumers should be limited, with their annual bills increasing by up to EUR 100.

"Those who generate their own electricity currently contribute less to financing the distribution grid. But they too rely on the grid when the sun is not shining and their batteries are empty. We therefore want generators to contribute a little more towards the costs. It is a matter of fairness. Otherwise, consumers without their own generation would increasingly bear the rising costs alone," Müller added.

Large consumers will pay for capacity

Bigger changes are in store for commercial and industrial consumers with annual consumption exceeding 100 MWh. In addition to paying for the amount of electricity they consume, these consumers will also pay for the capacity of their grid connection. If they exceed their agreed capacity, they will then pay a penalty calculated according to the volume of electricity drawn.

"We are giving commercial and industrial consumers greater flexibility in their electricity consumption. This is a great opportunity to respond more effectively to low electricity prices. Both large consumers and the energy system benefit equally," Klaus Müller said of the planned changes to the payment structure for large consumers.

Changes are also in store for electricity generators, which will newly be expected to contribute to the operating costs of distribution systems. According to the regulator, charges should range from EUR 4 to 7 per kW per year. Existing power plants will, however, be exempt from these charges for 20 years from the date they enter service. The regulator expects the introduction of these charges to have a limited impact on the market, while potentially generating around EUR 2 billion annually for grid development. These charges are not expected to apply to small plug-in solar systems or prosumers.

Energy storage will also contribute to grid financing

In Germany, the obligation to contribute to grid financing will also newly apply to operators of pumped-storage power plants and battery storage facilities. Operators of these storage facilities will therefore pay for grid capacity in a similar way to generators, but will not be charged for the electricity they draw.

According to the president of Germany’s regulator, this obligation should apply to new projects, to provide certainty for projects already under way. Specifically, it will apply to projects for which the final investment decision is made only after the provisions enter into force.

"Energy storage is essential to the energy system of the future and to improving security of supply. We need much more of it. Energy storage responds flexibly to price signals, and we want to prevent this from further worsening grid congestion," Klaus Müller added.

Distribution charges are expected to become dynamic in the future

With the growing share of intermittent generation, primarily solar and wind power plants, grid congestion is also becoming increasingly common. Dynamic distribution charges are expected to help address this situation by encouraging consumers to shift their consumption to periods of lower demand.

According to the regulator, however, designing a system of dynamic charges will require extensive analysis. This will examine potential impacts on wholesale markets, redispatch requirements and whether the system can be implemented in practice. The first concept for a dynamic charging system should be ready by the end of next year.

Although the precise design of dynamic charges is not yet known, Germany’s regulator has already outlined a possible implementation timetable. For energy storage, dynamic charges should be introduced between 2030 and 2033. For electricity generators, dynamic tariffs should be introduced between 2032 and 2035, with offshore wind farms exempt.

As for flexibility on the low-voltage grid, the regulator says work must progress quickly and consistently on developing variable grid connection charges for operators of home battery storage systems and electric vehicles. For consumers connected to the low-voltage grid, participation could be voluntary.