Bundesnetzagentur plans reform of network tariffs for industry
Year of issue 2024
Date of issue 2024.07.24
The Bundesnetzagentur has today published a key elements paper in which it further develops the regulation of network tariffs for industrial customers. The key elements paper is part of determination proceedings that the Bundesnetzagentur is also opening today.
"The old network tariff discounts no longer measure up to an electricity system characterised by high shares of renewable electricity generation. In the future we want to stimulate the type of consumption behaviour in industry that benefits the system. Industry and businesses should pay reduced network tariffs when they consume more electricity in situations where electricity supply is high. Conversely, they should also receive a reduction in network tariffs when they consume less electricity in situations where electricity supply is low. We are proposing switching from a rigid system to a system that is flexible. We now wish to discuss the future system in detail with all stakeholders,"
said Klaus Müller, President of the Bundesnetzagentur.
Adjustment of consumption to current price trends
The Bundesnetzagentur is proposing an arrangement that creates an incentive for electricity-intensive companies to respond dynamically to the actual generation status. This is reflected primarily in prices on the power exchange.
The aim of the arrangement is to strengthen the market signal through the network tariffs. An alternative network tariff should generally be granted to companies that significantly increase their consumption (compared to their own annual average) when prices are especially low and significantly reduce their consumption (compared to their own annual average) when prices are especially high.
The exact balancing of the incentive mechanism depends on industry's technical forecasting capabilities and the ability to react flexibly to volume and price changes. Final customers should not be overburdened, but rather the flexibility potential that actually exists and will be achievable in the future should be utilised.
Regional exceptions and transitional arrangements
Congestion tends to arise due to flow conditions in regions with a low level of distributed feed-in from renewables. Here reactions to the market signal can sometimes have a worsening effect. The Bundesnetzagentur would like to discuss whether and how regional exceptions can be made until network expansion reaches a level that enables a strengthening of the market signal throughout Germany.
Existing agreements on individual network tariffs should not immediately lose their effect. The plan is that companies will be granted transitional periods that will make it possible to adjust production and utilise flexibility potential.
Background to network tariffs for industry
Electricity network tariffs contain various incentives for industry and business that encourage certain behaviour. Industrial and commercial final customers pay a reduced tariff for what is referred to as atypical network use if their annual peak load deviates from the annual peak load of all consumption from the network. This should limit the necessary network dimensioning. By contrast, the purpose of the permanent load is to incentivise a constantly steady baseload of electricity-intensive final customers.
As a result of the special network tariffs under section 19(2) of the Ordinance concerning Tariffs for Access to Electricity Networks (StromNEV), around 400 permanent load customers and around 4,200 atypical network users under the responsibility of the Bundesnetzagentur will obtain a network tariff reduction totalling more than €1bn in 2024. The resulting lost revenue for network operators is passed on to all network users through a levy, which for the current year is 0.643 ct/kWh.
The energy transition is drastically changing the power producer landscape, which inevitably leads to new requirements in network operation. As a result, the incentives provided by special network tariffs need to be reassessed.
The effectiveness of incentivised atypical network use has been greatly reduced in networks with a large share of renewable energy. Additional network expansion is caused primarily not by the demand side but by the entry side. Accordingly, shifts in the individual annual peak load do not result in any cost savings.
The permanent load privilege in its current form has largely lost its legitimacy in the new energy economic framework conditions and has created false incentives. Inflexible consumption behaviour is becoming overall economically disadvantageous and may inhibit the integration of renewables on the electricity market. Inflexible consumption behaviour may also be detrimental when the system is in a critical state. At the same time, dynamic responses to the feed-in situation (in particular by electricity-intensive industrial companies) can be very useful to the system.
Consultation on the key elements paper
The Bundesnetzagentur is seeking an in-depth exchange of views with the industry to achieve the goals set out above. The key elements paper has been published at www.bundesnetzagentur.de/eckpunkte-industrie. The public consultation will be ongoing until 18 September 2024. The new arrangements are scheduled to enter into force on 1 January 2026.