Before the liberalization of the electricity market, the power grids were operated by state-owned utilities, which incorporated the costs of grid operation into electricity prices. Since liberalization in the 1990s, grid fees have been charged by grid operators as an additional item on electricity and gas bills. These costs include the operation, expansion, and maintenance of the power grids, as well as various surcharges and levies to promote renewable energy and other energy policy goals. Since grid expansion has become an increasingly urgent item on the energy transition’s to-do list due to the growing deployment of renewables, its steadily rising cost estimates—as a major expense on consumers’ electricity bills—have moved to the very top of the agenda for both the business community and the public.
This is leading to growing discussions about the transparency and appropriateness of grid fees, as well as how costs can be distributed more equitably among consumers and how incentives can be created for more efficient use of the power grids. These measures include, for example, adjustments to the grid tariff structure, the promotion of flexibility measures, and the digitization of power grids to improve grid utilization and efficiency.
Various instruments are currently being discussed, such as dynamic, flexible or variable grid fees. Dynamic grid fees: https://www.bundesnetzagentur.de/DE/Beschlusskammern/1_GZ/BK6-GZ/2022/BK6-22-300/Stellungsnahmen_zweite_Konsultation/LichtBlick%20SE%20und%20Neon%20Neue%20Energie%C3%B6konomik%20Memo.pdf?__blob=publicationFile&v=1
In this context, the fees to be paid are based on grid load or seasonal factors. Flexible grid fees could also be structured so that consumers who can respond flexibly to grid congestion are rewarded with lower fees or even incentives. This could create incentives, for example, to shift loads or use battery energy storage systems, thereby relieving the strain on the grid.
The current grid fee regulations also already include various special provisions for calculating grid fees that support certain consumer groups or encourage specific behaviors.
One example of this is the agreement on individual grid fees, which grants large-scale consumers with a guaranteed band load commitment a reduction in grid fees. While this may sound counterintuitive in the context of the energy transition, it has its origins in the era before renewable energy generation. The centralized supply of electricity from large power plants relied less on consumer flexibility than on guaranteeing a secure minimum off-take for the power plants. With their baseload demand, large industrial consumers were ideal partners for making electricity generation more economical for operators—and thus also more cost-effective for consumers—despite fluctuating energy demand. To ensure at the same time that not every industrial consumer would build its own line to the nearest large power plant, a reduction in grid fees for Germany’s shared power grid was agreed upon.
In the context of the energy transition, this „bandload criterion“ is being called into question. The incentive to guarantee continuous consumption no longer aligns with the reality of power generation in Germany, particularly given the volatility of renewable energy production. Furthermore, strict adherence to this criterion hinders flexibility because any deviation risks the loss of individual grid fees, potentially resulting in additional costs running into the millions for companies.
In order to avert this business-threatening scenario and still be able to utilise the benefits of industrial load flexibility to a certain extent for the benefit of grid security, the Federal Network Agency recently defined exceptions to the band load criterion. This means that companies will be allowed to reduce their load when electricity prices are particularly high. Put simply, these high-price phases result from a combination of a lack of renewable generation and high demand, such as often occurs in the mornings and evenings when photovoltaic generation is not fully available as the sun rises and sets and cannot yet or can no longer cover consumption. Reducing the load from industrial processes can have a price-reducing effect at these times because no expensive gas-fired power plants have to step in to flank the renewables in this phase of the so-called PV ramps, which is sensitive for the electricity grid. For industrial consumers, this has the pleasant side effect that they can in turn reduce their own electricity costs or sell the electricity they have already purchased over the long term into the market at a profit and thus further reduce the need for electricity to be generated in the short term with the help of this flexibility marketing.
However, such special provisions do not have a long-term outlook simply because of their relevance to state aid—according to the Federal Network Agency, which is seeking a successor regulation that complies with state aid rules. However, completely eliminating the discount on grid fees for industrial companies would deprive them of their economic prospects—a classic dilemma.
At this point, we will outline two possible solutions, which should, however, be viewed as suggestions rather than fully developed concepts. Both are based on maintaining the discounted grid fees.
Option 1 – The Individual Grid Fee
Add the following provision to the regulation on individual grid fees: „Load flexibility that serves the system has no impact on the type or amount of grid fees to be paid.“ This statement was already included, in essence, in the Green and White Papers on the Electricity Market 2.0.
The objection that the band-load criterion is outdated must be countered by the fact that a band load—which can respond flexibly to the generation situation of renewables as needed—has a clearly defined starting point based on its rated load and thus offers a reliable flexibility option. This makes it comparable to a fully charged energy storage system or, depending on the circumstances, even—at one’s discretion—to a charged or discharged battery storage system.
Option 2 – Flexibility
Flexibility as a criterion for eligibility for special rates – To integrate renewable energy generation, the consumer system needs as much flexibility as possible, including smart flexibility trading. Industrial processes have different options for load shifting than, for example, Battery Storage, especially if they can „hedge“ their consumption with a storable product. From the perspective of the energy system, it also makes no difference whether a battery storage system stores electricity, a company draws more power, the energy storage system feeds power into the grid, or the company draws less power. Flexible consumers could therefore be offered an individualized grid fee based on their contribution to the integration of renewable electricity generation. After all, they help save money on grid expansion and reduce costs for balancing energy and redispatch, which would otherwise be financed through grid fees.
In addition, it is absolutely essential to remove the time limit on such regulations in order to provide the planning certainty that has been lacking thus far—a certainty that is necessary to enable investments in additional flexibility in the first place.
As a side note, the concept of the „physical path“—which has formed the basis for calculating individual grid fees to date—must also be rethought. For example, the „new“ physical path could be calculated to the nearest grid bottleneck. This would allow grid expansion to be integrated into the relief mechanism rather than providing a flat-rate relief. It would also be conceivable to use grid nodes—where the lines from wind and solar farms converge—as the basis for the calculation. Both options could reduce redispatch and thus render the discussion about the necessity of separating electricity price zones in Germany obsolete. However, this topic requires separate consideration.
Overall, grid fees are facing an exciting future in which they will play a central role in the implementation of the energy transition, but not only grid fees.
As part of the transformation of our energy generation landscape, an entire system is being turned upside down, and the new elements usually don’t fit perfectly with the old ones. Especially during this period of upheaval, investments need a secure (regulatory framework) and a reliable planning horizon. These must enable pragmatic and quickly implementable (bridging) solutions—more „quick and dirty“ than based on the familiar principle of „German thoroughness.“ The goals must be defined, and the paths to them must be flexible and open to ideas and suggestions—even at the risk that one or two of those paths might end in a dead end. It is stagnation that threatens the transformation, not potential mistakes.
