Technical Article

The fine print in the "power price brake" - or: Why the federal government is just opening Pandora's box and endangering the energy transition

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Special times call for special measures. Who would have thought it possible a year ago that a brutal war of aggression would take place in the middle of Europe and that Germany would also feel the consequences so clearly - not directly militarily in its own country, but in our energy supply, among other things.

In this situation, the federal government must remain able to act and react to the extreme situation, which is partly more successful, partly - see gas levy - less successful. A central element of countermeasures is the so-called "Power price brake", which is currently undergoing the legislative process. A first draft was presented on 22.11. However, what the federal government is proposing there in fine print must not become law, because the consequences for the energy transition would be unforeseeable.

There is talk of the final and immediate abolition of the so-called "avoided network charges", regulated in Section 120 of the Energy Industry Act and in Section 18 of the Electricity Network Charges Ordinance. Avoided network charges are distributed to generation plants by the connection network operator when decentralized electricity generation counteracts consumption in a grid area. Specifically, a local network operator pays a lower amount of network fees to the upstream network operator if, during periods of maximum annual load, a decentralized producer feeds into the grid and thus reduces the network operator's annual maximum load. These savings are then passed on by the network operator to the decentralized producer and paid out.

There is a broad consensus in the industry that the network charging system is urgent and in need of fundamental reform. The entire network charging system geared purely to peak loads no longer fits into a time when grid expansion requirements are often driven by renewables, and not from the load side. We can look forward to the reform momentum in the near future. However, it was recognized years ago that the "avoided network charges" were an outdated model. It was therefore decided to pay them out only to investments that will be connected to the grid by 31.12.2022 at the latest. This also applies to energy storage devices in their function as feeders, i.e. "power generators" when they are discharged.

This seemed to finally resolve the issue of "avoided network charges" - pending the publication of the draft law on curbing electricity prices. You have to look very closely, but the one hundred and sixty-one page package also provides that the above-mentioned §120 EnWG and §18 StromNEV should be omitted. Without replacement, with immediate effect and without transitional arrangements. The decision comes as a surprise, but the accompanying justification for this immediate abolition of avoided network charges is included in the draft and leaves no doubt: The regulation should be stopped immediately; the costs of the measure are used as an argument. It is succinctly stated: "In principle, network tariff regulations cannot be relied on as a matter of principle. The deletion of Section 18 as of January 1, 2023 therefore completely terminates these payments, which last accounted for five percent of the distribution system operators' network fee. "

The federal government is opening Pandora's box here, because the question is: If there is no inventory protection for key elements of the business model of battery storage and other energy storage systems, how can investment security be established?

It should be noted that almost 500 MW of battery storage projects will be connected to the grid this year, of which over 120 MW were planned by Kyon Energy. The majority of these storage systems have included the revenues from the "avoided network charges" as fixed variables in the project case, as this represents just under 30% of the total expected income. The plants would not have been implemented in this form if the instrument of "avoided network charges" had not existed. Does the federal government really not want these storage facilities?

And if the dams break here and there is no longer any protection of the population, which alleged subsidy will be crushed next without warning? As long as this question remains about future investment decisions, investors will be very cautious, possibly in the long term. The necessary expansion of storage will therefore be delayed at least significantly and made significantly more expensive as a result of rising return expectations. The expected 5% savings in network charges in connection with the planned abolition of avoided network charges, of which only a tiny fraction is attributable to future investments such as battery storage, appear more than modest given this prospect.

That must not happen and the electricity price brake law must under no circumstances be passed in this form. It is to be hoped that the idea of abolishing avoided network charges in its current form will be quickly buried and forgotten soon, just like the gas levy recently. When preparing the draft, the speakers at the Federal Ministry of Economics were probably not aware that, in addition to various fossil fuels, energy storage systems were also affected by the measures, and to a particularly large extent. We now hope that transitional and/or exemption regulations for storage systems will now be created as part of the actual legislative process for curbing electricity prices in the Bundestag.

In addition, we hope for a thorough reform of energy industry law in the next few months in order to anchor energy storage systems there as plants that are neither final consumers nor producers of electrical energy, but rather energy storage systems in accordance with the recently defined definition in the Energy Industry Act. The enormous benefits of storage systems for securing grid operation must also be reflected there so that storage systems can fully exploit their technical strengths within the regulatory framework and further accelerate the energy transition. However, this should not distract from the damage limitation, which is now necessary immediately when correcting the "electricity price brake."

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