Concept Paper "Energy Storage Facilities Grid Connection Ordinance" (SpeicherNAV)

Concept Paper "Energy Storage Facilities Grid Connection Ordinance" (SpeicherNAV)
I. Status quo - problems with grid connection of storage facilities

On July 1, 2023, the new definition of energy storage facility pursuant to Section 3 number 15d EnWG1 came into force. This gives storage facilities a new status in energy law. The definition recognizes that essential characteristic of storage facilities for the energy system is the deferral of the final use of electrical energy to a later point in time than that of its generation and that storage facilities are not final consumption facilities and generation facilities. To address the new role of energy storage facilities in the energy system and remove barriers to storage, various changes are needed in the existing legal framework under energy law - created for the generation, transport and consumption of electricity.  

Among other things, this affects the grid connection of storage facilities. Up to now, there have only been regulations for end consumers and generation plants, some of which are applied to storage facilities. This initially leads to a considerable degree of legal uncertainty, because the application of the regulations designed for end consumers and generation plants to storage facilities is often not possible or meaningful on a 1-to-1 basis. The resulting scope for interpretation and application is already an obstacle to investment per se. In individual points, the current legal framework also leads directly to disadvantageous effects for storage facilities, which put the brakes on an urgently needed expansion and set the wrong incentives from a systemic and economic point of view. In other areas, regulations for (multi-use) storage facilities are lacking. The following hurdles currently exist for grid connection and grid use of storage facilities:  

1. charging storage facilities with the construction cost surcharge (designed for end consumers)
2. time limit of the network charge exemption according to Section 118 (6) EnWG to storage facilities with commissioning until mid-2026
3. no applicability of the network charge exemption according to Section 118 (6) EnWG to multi-use storage facilities
4. too long duration of the processing of network connection requests
5. Too long duration of the establishment of grid connections or even non-availability of grid connections due to unnecessary "worst case" consideration of the output of the storage facility, because a permanent purchase and at the same time a permanent feed-in of the storage facility with full output (as with an end consumer/generation plant) is taken as a basis for grid planning.  

II. Solution Approach: Energy Storage Facilities Grid Connection Ordinance (SpeicherNAV).

The hurdles and disincentives mentioned above under 1. to 3. can at least be partially countered with amendments to the Energy Industry Act. However, these issues are not the subject of this concept paper. Instead, the following outlines how, with regard to the problems mentioned above under 4. and 5., an "Energy Storage Facilities Grid Connection Ordinance" (SpeicherNAV) could look in order to do justice to the special features of storage facilities when connecting them to the grid and to remove the serious hurdles mentioned under 4. and 5.  

1. objectives of the storageNAV

The goals of the storage NAV must be defined from the perspective of the overall energy system, taking into account both the current state of the energy system in Germany and the expected further substantial addition of PV and wind energy plants.  

Particularly worthy of mention are:  

1. accelerating the connection of storage facilities to the grid
2. allocating storage facilities to locations that serve the system
3. ensuring that storage facilities are operated in a way that serves the system
4. ensuring that the economic benefits of storage operations are distributed fairly between storage operators and society.  

2. structure of the memoryNAV

With regard to the structure, it is obvious to be guided by already existing regulations, in particular the EEG, but also the KraftNAV.

3. contents of the storageNAV

a. Scope of the StorageNAV

The scope should include all grid connections of energy storage facilities to electricity supply grids with a voltage of at least 10 kilovolts (medium voltage grids and above).

b. Entitlement to priority and immediate connection to the grid

Due to their importance for the energy system, energy storage facilities that serve the system should in principle be entitled to priority and immediate connection to the grid, comparable to renewable energy facilities. In this respect, the regulations can be largely modeled on Section 8 EEG 2023. This applies in particular to the information to be provided by the grid operator, the obligation to provide a web portal, the response periods and the determination of the most economically favorable grid connection point, taking into account the special features and capabilities of storage facilities.  

In particular, the obligation to connect to the grid must also exist if the purchase of electricity is only made possible by the optimization, reinforcement or expansion of the grid. In many cases, however, storage facilities will have the effect of relieving the load on grids and avoiding or at least postponing higher-level measures to expand grids. This may and must be taken into account by the network operator when examining network connection requests under the Storage Ordinance.

c. Ensuring that the energy storage facility serves the system

The core of the StorageNAV should then be regulations that ensure that energy storage facilities that benefit from privileges under the StorageNAV (and other regulations, if applicable) not only can, but also must, make a significant contribution to system stability. We consider this to be necessary in order to create a sustainable basis for the privileged treatment of storage facilities vis-à-vis fossil generation plants and end consumers - one that also complies with state aid law.  

In view of the diverse technical capabilities of storage facilities and, at the same time, the many different situations in the distribution grid areas, we propose in this respect as a flexible and individual solution approach that distribution grid operators - according to predefined rules (see the following points) are allowed to define certain guard rails for the mode of operation ("operating concept") for each energy storage facility.

d. Procedure of grid connection

As a basis for the operating concept, the storage operator first specifies the technical capabilities and limits of the planned storage facility in his grid connection request. The network operator then examines - similar to the requirements of § 3 KraftNAV - the connection point, connection lines as well as load flows and other effects on the network. In addition, it shall examine the anticipated scope of use of the energy storage facility for redispatch measures, whereby the connectee may request that the network operator also carry out checks based on assumptions made by the connectee, in particular with regard to anticipated positive or network-relieving effects of the storage facility on the network.

The network operator should then be obliged to complete the tests within a specified period of no more than three months, to specify the connection point and the possible connection time, and to provide the storage operator with the operating concept. In doing so, it must be justified in detail what benefits the operating limits specified in the operating concept bring to the distribution network and that the requirements of the Storage NAV have been taken into account.  

Within the operating concept, the network operator should have the possibility to provide, on the basis of the specific needs in the respective network area, that, in each case within a predefined framework,  

a) can adjust the operating mode of the storage facility provided for by the system operator in terms of time, both in the direction of withdrawal and in the direction of injection,
b) can also adjust the operating mode of the storage facility provided for by the system operator in terms of amount, both in the direction of withdrawal and in the direction of injection,
c) can contract operating periods and operating cycles of the storage facility at predefined conditions, also on a long-term basis, and can freely dispose of the storage facility in limited periods of time, and
d) can prohibit the storage facility operator (capacity, periods of time) from providing balancing energy to the responsible transmission system operator.  

The right of the network operator to specify operating limits should be limited to the minimum required for secure operation of the distribution network.
The need for redispatch measures in the respective network area is reduced overall by the storage facility dispatch made possible on the basis of the operating concept.
Grid-serving energy storage facilities with a corresponding operating concept in accordance with the requirements of the SpeicherNAV must at the same time be excluded from the scope of redispatch (Sections 13, 13a EnWG).

e. Connection commitment and legal obligation

The result of the procedure would then be a connection commitment by the network operator, including an operating concept, which would establish a legal obligation. This corresponds to the - proven - concept of the EEG.

f. Right to refuse grid connections

As under the EEG, the grid operator has the right to refuse grid connections in the event of technical impossibility or economic unreasonableness, although - unlike under the EEG - the legislator should define more precisely when a case of economic unreasonableness exists.

g. Arbitration body in the event of disputes

By means of an unbureaucratic and time-limited arbitration or conciliation procedure, both storage operators and network operators should have the opportunity to reach a constructive agreement on the network connection itself, the details of the network connection and, in particular, the operating concept. Corresponding procedures should be carried out at the respective regulatory authority responsible for the network operator - if possible online.

h. Deadline for implementation of grid connection

The storage operator's right to immediate grid connection should be flanked by a standard deadline ("without delay, but within 12 months at the latest"), with the grid operator being given the option of extending the deadline for reasons for which it is not responsible. The burden of presentation and proof for these reasons is to be placed on the network operator. This proposal takes into account the fact that the lack of implementation deadlines for grid connection in other ordinances and laws (EnWG, EEG, StromNZV, GasNZV) has so far meant that the entitlement to immediate grid connection has de facto run dry, because it is regularly not possible for subscribers themselves to prove that a certain period was too long or that delays were the fault of the grid operator.

i. Cost allocation for grid connection and grid expansion

In accordance with the regulations on cost allocation under sections 16 and 17 EEG, the storage operator should bear the costs for grid connection and the grid operator should bear the costs for optimization, reinforcement and expansion of the grid.
The costs of reviewing the grid connection request on the basis of the SpeicherNAV should be borne by the storage operator. This would ensure that network operators are only involved with serious projects.
The costs of compensation must be able to be recognized by the network operator within the framework of incentive regulation - just like costs from redispatch.

j. Financial compensation of storage operation restrictions

The costs of compensation must be able to be recognized by the network operator within the framework of incentive regulation - just like costs from redispatch. The financial compensation for the restrictions on storage operation can essentially be based on the provisions of Section 13a EnWG (redispatch measures). The financial compensation must be made in such a way that the storage operator is not placed in a worse economic position than it would be in without operating restrictions. Appropriate financial compensation must therefore include the following components:  

a) Necessary additional costs of the energy storage system due to the specifications of the operating concept
b) Necessary expenses for the adjustment of the purchase or the feed-in of the energy storage system due to the operating concept
c) The value consumption of the system for the adjustment of the purchase or the feed-in of the energy storage system due to the operating concept
d) The lost revenue opportunities due to the restrictions of the operating concept
e) The necessary expenses for the establishment of operational readiness or the postponement of a planned revision.

k. No building cost subsidy

Finally, the Storage NAV should also stipulate that no construction cost surcharge may be levied when energy storage systems are connected to the grid.

About Kyon Energy

Kyon Energy is a German project and business development company focused on large-scale battery storage systems. With 121 MW of battery storage systems successfully developed and sold with partners in 2022 and a current project pipeline of over 7 GW, Kyon Energy is one of the market leaders in Germany. The company has a particular focus in the development and optimization of multi-use strategies, combined with deep expertise in project development and management as well as regulation of large-scale battery storage. Through its battery storage systems, Kyon Energy is a driver of the energy transition and strives for a world powered by renewable, sustainable and independent energy.

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