Conference “Energy Market in Transition” by Federal Network Agency and Consumer Protection Agency

The Federal Network Agency (BNetzA) and the Federal Association of Consumer Protection Agencies (vzbv) hosted a joint conference on the “Energy Market in Transition” (Energiemarkt im Wandel). It dealt with the impact of the energy policy shift towards a renewable energy supply for consumers, in particular rising electricity prices, and the reluctance of consumers to switch the supplier in view of cases of untrustworthy providers. Besides, vzbv and BNetzA made interesting comments on the regulation of the distribution networks, which shall be the topic of this blog post.

Vzbv called for a tighter regulation of distribution networks demanding higher efficiency requirements (Effizienzanforderungen) in the existing grids. Besides the de minimis rule, which protects small grid operators partly from the efficiency requirements should be abolished, the association demanded, saying this would lead to cost reductions in the billion Euro range.

The Incentive Regulation Ordinance (ARegV) according to which the revenue caps on the the grid fees for German network operators are calculated sets efficiency requirements. Pursuant to Section 12 para. 1 sent. 1 ARegV BNetzA carries out a nationwide a nationwide efficiency review among electricity and gas grid operators with the aim to establish the individual efficiency factor. This efficiency factor is included in the overall costs for the grid operator after deducting so-called “permanently not influenceable costs” (i.e. not controllable costs; cf. Section Section 12 para. 2 ARegV). When determining the revenue cap, the regulatory agency (usually BNetzA) has to make sure that the individual inefficiency is being reduced within one or more regulation periods (cf. Section 16 para. 1 sent. 1 ARegV). According to Section 24 para. 1 there is however a simplified procedure to determine the efficiency factor for gas distribution grids with less than 15,000 customers connected and electricity distribution networks with less than 30,000 customers connected. 

The head of vzbz, Gerd Billen, also said 25 to 40 regional distribution grid operators that were responsible for the grids in their region were enough. This would lead to less need for grid expansion, also for transmission grids, he added. 

BNetzA pointed out that it was difficult to prescribe the change (in the ownership) of the distribution grids (which are mostly privately owned) by law, but said the regulatory framework had to be altered so that incentives for operating inefficient networks were no longer provided. The large number of grid operators and the lack of standardised grid excess contracts in the electricity sector was a major cost driver, BNetzA president Jochen Homann said. A provider operating nationwide had to conclude 800 supply contracts, he explained, adding that BNetzA would have to deal with the issue if the electricity associations did not come up with a guideline. BNetzA would prefer an proposal brought forward by the electricity sector itself, Mr Homann said. The cooperation agreement in the gas sector was a good example, he remarked.

One agreed that it was necessary to review the grid charges system with regard to investment costs into the grids that were avoided avoided due to decentralised input into the grids and an equal payment of grid charges by all grid users, BNetzA and vzbz said in their joint press release. Every user who relied on the security and quality of the grids had to contribute evenly. With a growing amount of decentralised generation this was, however, not the case anymore, since grid charges did not have to be paid for self-consumed electricity and a decentralised input into the grids.

Vzbv also call for a review the new offshore liability charge introduced last year. Besides the association demanded to limit payments for investment costs into the grids avoided due to a decentralised input (cf. Section 18 StromNEV) to cases in which there was evidence for a stabilisation of the grids due to the input.

Source: Federal Network Agency (joint press release with vzbz)

1 Response to “Conference “Energy Market in Transition” by Federal Network Agency and Consumer Protection Agency”

  • They are strong reasons why renewable decentralized input are unlikely to avoid much if any investment costs for the grids (and they create quite a few).

    The investment costs depend mostly on the largest capacity that may be needed on the line, and also what will be needed the maintain constantly the reactive power.

    As the decentralized input can not be safely relied on to provide significant power at the time of max demand, the largest capacity that can possibly be needed through the line varies very little proportionally.

    Reactive power is very complex, but depend quite much on of fast demand varies, and how far the nearest controllable power source is. The easiest way to integrate the decentralized production with regard to it is to ignore it as a source of power, and consider the residual demand. And residual demand tends to vary more (high point it still as high, but low point is lower) and maybe somewhat faster than the original demand.

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