Regulator calls for reform of network charges in Germany; generators may also have to pay

Germany’s network regulator (BNetzA) is calling for reform of the network charge system in Germany. The regulator is considering extending network charges to electricity generators. The current framework is based solely on payments by end consumers.

The ambitious expansion of renewable energy, the growing decentralisation of electricity generation and the increasing need for grid flexibility pose major challenges for the network charge system. BNetzA has therefore launched a process to fundamentally reform transmission and distribution network charges.

“We need to reform the system used to collect network charges. First, the number of users paying charges in full is constantly falling, while costs are rising. Second, we do not have sufficiently effective signals on how and where power plants can be operated cost-effectively to prevent unnecessarily costly grid expansion. Third, the system currently offers no incentives to reward flexible behaviour—in fact, the opposite is true,” said Klaus Müller, president of BNetzA.

In a discussion paper, the regulator presents possible options for changing network usage charges. These include extending the charges to electricity generators. Unlike the gas transmission system and network charge systems in some other European countries, network charges in Germany are paid exclusively by consumers.

BNetzA wants to discuss, for example, how to charge for electricity fed into the grid. At voltage levels above low voltage, all network charge components are currently based exclusively on consumption. A flat basic charge could better reflect costs. New charge components, such as a basic charge or a charge for reserved capacity, are also being considered.

“Consumption is charged for even though it is not the main factor driving costs,” BNetzA added.

For customers connected to the low-voltage grid, too, strengthening the existing basic charge component could ensure an appropriate contribution to grid costs. The capacity reserved on the grid connection plays a key role in grid sizing and is considered another cost factor.

BNetzA is also open to introducing dynamic network charges that depend on grid usage in a given location. However, a network charge based on actual grid usage requires a number of technical prerequisites, including the near-complete digitalisation of the grid and its users. For example, Germany is lagging significantly behind in the international comparison when it comes to rolling out smart meters with interval metering.

To ensure that storage systems are integrated in a way that benefits the grid and the wider system, the discussion paper will address charges for these systems separately.

Options for changes are to be discussed openly and through an ongoing, close dialogue with all stakeholders.

Why change is needed

Since the current form of network charges came into force, Germany’s electricity system and the way it operates have changed significantly. A high share of electricity supplied from locations far from consumption centres drives up grid expansion costs and is increasingly leading to areas where electricity generation exceeds consumption.

The growth in renewable energy generation also means that energy consumption and supply need to become increasingly flexible. The growing number of prosumers—that is, customers who not only draw electricity from the grid but can also feed it in—means that the funding shortfall for grids is deepening. In addition, a growing number of flexible consumers and electricity storage systems need to be integrated sensibly into the market and the grid.