Position paper on regional price signals for more cost efficiency in the transmission system
Year of issue 2024
Date of issue 2024.11.20
The Bundesnetzagentur has today published a position paper on calculating and charging construction cost contributions for electricity network operators. It provides incentives for the network-oriented planning of new locations for network connections.
"The expansion of the electricity grid as part of the energy transition entails costs. This is why it is important to use prices to encourage the conscious and economical use of connection capacity and more cost efficiency. If we are able to tailor new large-scale consumers, storage facilities or electrolysers more to the existing electricity grid and integrate them intelligently, we will save costs in grid expansion. Connection users' contributions to the network costs should differ depending on how advantageous their connection at a particular location is for the system as a whole,"
said Klaus Müller, President of the Bundesnetzagentur.
Model in position paper
Connection users already pay a share of the costs of network expansion through a financial contribution for their new or extended network connection. Unlike the annual network tariffs payable for regular consumption, this contribution to construction costs is a single, one-off payment. The construction cost contribution is to be calculated from the price for the power and the necessary network capacity. Long-standing practice is to use the costs of capacity expansion in the network as a basis. However, other calculation models are also possible.
The contributions to construction costs are important as they send a signal to use connection capacity economically to avoid the need for further network expansion.
The construction cost contributions are not intended as an instrument to substantially lower network tariffs. Historically, the contributions cover only a single-digit percentage of the network costs. Their primary function is to manage the individual connections rather than to finance the overall system.The aim is to contribute to more cost efficiency in the electricity grid through financial signals.
In future, the transmission system operators are to differentiate between the contributions to construction costs. Five levels of contributions are planned, which the operators will update regularly. Each grid connection point will be allocated to a level according to the effect the new connection has on the transport of electricity.
A contribution may be lower if the connection location of a consumer proves beneficial from the perspective of the transmission system. This is the case for example if connection of a consumer – whether an industrial company, an electrolyser or an electricity storage facility – at a certain location causes lower or no additional costs. At the same time, a lower contribution can create an incentive for operators of electrolysers, for instance, to choose a location where there is a sufficient or excess supply of electricity.
Based on the network tariffs currently planned by the transmission system operators, a connection user with a connection capacity of 600 megawatts would pay around €60mn in the case of a 100% contribution to construction costs and around €12mn in the case of a 20% contribution.
Construction cost contributions that have already been agreed for projects to be completed in 2024 or 2025 will remain unchanged. This also means that investment decisions that have already been made will not become more expensive on account of a contribution to construction costs. The network operators know which major connection projects they have and are responsible for concluding contracts defining when construction cost contributions will be determined.
Background
A position paper serves as guidance for the market about the authority's legal stance. It does not have a direct, binding legal effect. However, it can provide help with specific issues, for instance regarding the conditions under which differentiated construction cost contributions are seen as permissible.
The distribution system operators facing expansion requirements due to network connection requests from consumers like industrial loads, electricity storage facilities or electrolysers already charge construction cost contributions.
Electricity generators feeding into the grid such as power plants and wind turbines are exempted by law from the contributions. This applies both to connections to the transmission system and to connections to a distribution network. Any change to this would first require changes to the legislation.
The construction cost contributions for households at low voltage level are regulated in an ordinance and are not affected by this position paper.
A legal dispute about construction cost contributions for battery storage facilities is currently ongoing at Germany's Federal Court of Justice. Until a decision to the contrary has been issued, the Bundesnetzagentur will continue to classify battery storage facilities as consumers in terms of grid usage when electricity is put into storage. Sufficient network capacity needs to be provided for these storage facilities as well.
The position paper has been published at www.bundesnetzagentur.de/bk8aktuell (in German).
