The construction cost subsidy for storage facilities must go! The federal government is called upon to act.

The construction cost subsidy for storage facilities must go! The federal government is called upon to act.

Recently, the Federal Network Agency published the scenario framework for the grid development plan 2037/2045. Looking at the expansion paths for energy storage used as a basis for grid development, it is assumed that 67.4 GW of PV battery storage and a further 23.7 GW of large-scale battery storage will be installed in the German power grid in 2037 - 15 years from now. A multiple of today's volumes! The approval of the scenario framework states that large-scale battery storage will "contribute to the integration of wind and PV" and it is assumed that those storage facilities will be located close to PV and wind across the country.

Currently, however, this basically very sensible idea is being thwarted, because an inaccuracy in the legislation that has received little public attention but is crucial for the geographical location of large-scale battery storage facilities is not being eliminated by the same Federal Network Agency in the interest of sensible storage expansion. We are talking about the so-called "construction cost subsidy", which the network operator charges network users on the occasion of the network connection. According to common practice, the construction cost subsidy is linked to the amount of the annual network charges that consumers pay for the power they draw from the network. Thus, in a sense, new subscribers are charged an additional annual contribution in network fees, which is used by the network operator for general network expansion measures (not for the actual network connection - this is paid for separately). The amount of the construction cost subsidy varies greatly from region to region and is typically much higher in southern Germany than in northern Germany. It represents a significant order of magnitude for large-scale battery storage. For example, the construction cost subsidy for a storage facility with a connected load of 100 MW in northern Germany is usually no more than EUR 5 million, but in many parts of southern Germany it is over EUR 14 million. The additional costs of EUR 9 million mentioned in the example represent a considerable part of the investment costs, which have a prohibitive effect on construction projects in southern Germany. The only sensible way out at the moment is to place the storage facilities in areas with low construction cost subsidies, all other things being equal: That is, predominantly in northern Germany. Unfortunately, because of course storage facilities are needed everywhere in Germany!

But let's take a step back. Why do battery storage systems pay a construction cost subsidy at all? After all, according to the legal definition in the recently revised Section 3 No. 15d of the Energy Industry Act (EnWG), an energy storage system is an "installation in an electricity network that postpones the final use of electrical energy to a later point in time than its generation (...)" and not an end consumer of electrical energy. Large-scale battery storage systems are only installed at high-performance network nodes in consultation with the network operators. They relieve the load on the grids and do not place an additional burden on them.

Now, one could object that this regulation has only been in place since June 2022 and that the consequences have not yet been reflected in all ordinances and in implementation practice. But far from it: many years ago, the legislator created a transitional provision in Section 118 of the Energy Industry Act that made the storage expansion we are currently experiencing in Germany possible in the first place. It states under No. 6: "Newly constructed facilities for the storage of electrical energy after December 31, 2008, which are commissioned within 15 years from August 4, 2011, are exempt from the fees for network access for a period of 20 years from commissioning with regard to the purchase of the electrical energy to be stored." This exemption is therefore currently valid for new plants until the year 2026.

So is the business practice of the network operators to nevertheless charge the construction cost surcharge illegal? Unfortunately, this is ultimately a question for lawyers, which Kyon Energy is currently having clarified in an ongoing abuse procedure at the Federal Network Agency. In the meantime, numerous grid operators continue to charge the construction cost surcharge for battery storage - with all the negative consequences for the distribution of storage in the German power grid.  

However, the legislator's intention in Section 118 EnWG seems to be clear, namely to reduce the hurdles for the expansion of storage facilities and to establish non-discriminatory grid access for storage facilities compared to generation facilities. Latter do not pay any fees for grid access, i.e. in particular neither construction cost subsidies nor grid fees. Against this background, it is quite possible that the legislator, when formulating the decisive paragraph 6 of Section 118, simply did not expect that there would still be room for interpretation with regard to the exemption from the construction cost subsidy.  

However, there is a glimmer of hope: as part of a number of legislative projects to secure the energy supply in winter, on September 30, 2022, the Bundestag formally called on the federal government, among others, to "submit proposals to remove existing barriers to the construction and use of storage facilities, including large-scale battery storage facilities. Within the framework of the requirements of the European Court of Justice, this includes, among other things, questions of the grid charge system and construction cost subsidies." The only obvious consequence for the German government to comply with this request is now to present a draft law to clarify that energy storage systems do not have to pay a construction cost subsidy.

We cannot afford any further delays in the current energy and climate crisis. These days, huge volumes of investment are being mobilized to build storage facilities with a volume of several gigawatts in Germany. The extremely ambitious targets set out in the scenario framework are thus coming within reach. But we must not allow the southern half of the country to be left empty-handed, with no storage facilities available for better integration of renewables, with all the negative consequences for grid expansion requirements and ultimately for security of supply. The industry is ready to create the necessary storage capacities for Germany's energy security and now expects the necessary course to be set by politicians. Therefore, we hereby make an urgent appeal to the federal government:  

Follow the call of the Bundestag and make it clear in the next amendment to the Energy Industry Act that battery storage and other energy storage systems do not have to pay a construction cost subsidy!  

The simplest solution for this would be the simple addition of the two words "including construction cost subsidies" to the existing exemption in Section 118 EnWG. This would buy time until a comprehensive reform of energy law, in which the new storage definition could then be consistently taken into account as a separate asset class alongside generators and consumers. A pragmatic and quickly implementable clarification of the transitional provision in Section 118 of the Energy Act would immediately make it clear to all parties involved that energy storage facilities are exempt from paying construction cost subsidies, even without the Federal Grid Agency, network operators and project developers having to call on their lawyers to clarify this issue in lengthy proceedings. The industry and all consumers in southern Germany will thank you!

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