Germany: proposal for new rules to support renewable energy projects

Why should I read this?

On 28 August 2024, the German Federal Ministry for Economic Affairs and Climate Action (Bundesministerium für Wirtschaft und Klimaschutz) published a draft bill with rules on uniform power grid connection processes and other changes to facilitate the development of renewable energy and other projects relevant for the energy transition. Part of the proposed changes shall implement Directive (EU) 2024/1711 amending Electricity Market Directive (EU) 2019/944. The proposed changes affect in particular the Energy Industry Act (Energiewirtschaftsgesetz – “EnWG”) and the Renewable Energies Act (Erneuerbare-Energien-Gesetz – “EEG”).

This article summarises the most important aspects of the draft bill from a project developer and  investor perspective.

What do I need to know?

Uniform power grid connection processes

Under the current regulatory framework, grid operators are, under the general rules contained in section 17 EnWG, required to treat requests for grid connections in an adequate, non-discriminatory and transparent manner; the implementation of these principles in specific grid connection processes is however subject to each grid operator’s discretion leading to numerous different grid connection rules across the country.

The ministry proposal foresees that the general provision in section 17 EnWG shall be complemented by the following rules for uniform grid connection processes applicable to power plants, power end-consumers, including e-vehicle charging points, and power storage systems:

• From the entry into force of the amendment act, power grid operators – including distribution system operators (“DSOs”) and transmission system operators (“TSOs”) – shall, within not more than three months from the receipt of a grid connection request, provide clear and transparent information on the status and further process of each grid connection request falling under section 17 EnwG, which shall serve the implementation of Directive (EU) 2024/1711.

• From 2026 onwards, power DSOs shall publish on their websites information on the grid connection process as well as on the data to be provided by the grid customers, whereas the format and requirement of such data shall be uniform for all DSOs as agreed between them before the new regime applies. After receipt of a grid connection request, the DSOs shall communicate the outcome of the assessment of the request and a time schedule for the implementation within eight weeks; requests for submission of missing information need to be made within two weeks.

Specific statutory law rules already exist for grid connection requests by end-consumers for the low-voltage level, conventional power plants with a capacity of at least 100 MW for the 110 kV level or higher, combined heat and power plants as well as renewable energy plants; these rules shall remain unaffected by the above proposal. Irrespective, the rules on the grid connection process for renewable energy plants in section 8 EEG shall be subject to changes similar to those of section 17 EnWG so that the process will to a great extent be similar.

Publication of non-binding grid connection information

In addition, the following rules on non-binding grid connection information shall be introduced in section 17a EnwG:

• From the entry into force of the amendment act, power grid operators (DSOs and TSOs) shall publish on their websites non-binding information on available and reserved grid connection capacities, which shall serve the implementation of Directive (EU) 2024/1711.

• For DSOs, such mere publication shall, from the date falling two years after the entry into force of the amendment act, be replaced by an online tool where power plants, power end-consumers (including e-vehicle charging points) and power storage systems with a minimum capacity of 135 kW can directly receive non-binding information for their grid connection request. The information shall in particular include a prognosis for different potential grid connection points, taking into account future grid optimisation and expansion measures as well as an estimate of the costs to be borne by the grid customer for the construction of the respective grid connection line. DSOs shall agree on uniform formats and contents of the prognosis, cost estimates and online interfaces in advance.

The latter changes are supposed to overcome the current burdensome practice of parallel grid connection requests and hence to achieve cost savings for both, grid operators and project developers.

Uniform rules on capacity reservations for renewable energy projects

Moreover, the draft bill contains uniform rules on capacity reservations for renewable energy projects. Grid operators have so far implemented processes for reserving grid capacities on a voluntary basis. The Federal Court of Justice (Bundesgerichtshof) confirmed last year that such reservations are in principle admissible if they are based on transparent and non-discriminatory criteria; however the court did not define such criteria (judgment of 21 March 2023, case no. XIII ZR 2/20).

Section 8a EEG of the draft bill is supposed to fill that gap by introducing a uniform regime for binding and time-limited capacity reservations for renewable energy projects with an installed capacity of at least 135 kW. The regime shall ensure both, planning security and timely release of reserved capacities if relevant projects are not implemented. To this end, the power grid operators must develop common, objective, transparent and non-discriminatory criteria for the granting of capacity reservations as well as their potential extension based on the project development progress and have them confirmed by the Federal Network Agency (Bundesnetzagentur).

The new regime shall apply from the second anniversary of the entry into force of the amendment act. However, capacity reservations made before that date under any voluntary capacity reservation scheme shall continue to apply for up to one year from that date.

Uniform calculation of financial participation of municipalities

Until now, operators of wind turbines have been allowed to make payments to municipalities in accordance with section 6 EEG not only for power fed into the grid but also for fictitious electricity quantities, which could have been generated but were not generated due to re-dispatch, e.g. during periods of negative spot market prices. For solar projects, the financial participation has always been limited to the power fed into the grid, which may be lower than the amount of generated electricity, in particular in the event of using it for a battery energy storage system.

The draft bill now foresees a uniform regime where the municipalities’ financial participation in both, wind turbines and solar installations, may be based on the amount of electricity generated, regardless of whether the electricity is fed into the public grid or not, but not on fictitious electricity amounts. Irrespective, the principle that grid operators shall compensate project operators which benefit from financial support under the EEG for any payments to municipalities only in relation to the power fed into the grid shall remain unchanged.

Cap on financial participation of municipalities and citizens

In addition to the financial participation of municipalities in accordance with section 6 EEG, the German federal states are allowed to implement schemes for further financial participation by the affected municipalities and citizens (section 22b para. 6 EEG); numerous federal states have already introduced corresponding rules.

In order to avoid distortions of competition between the federal states, the ministry proposal foresees a standardisation and limitation of the scope of action of the federal states with respect to the financial participation of municipalities and citizens: the federal states may introduce mandatory participation rules, but must offer operators a choice between several forms of participation, whereas the plant operators must always be given the opportunity to offer the municipalities or citizens a participation corresponding to a value of no more than 0.3 ct/kWh of the generated electricity. In addition, plant operators must be given the possibility to offer 0.2 ct/kWh of that amount by way of the financial participation pursuant to section 6 EEG, if the latter is applicable to the installation in question. It can therefore be expected that the total amount of 0.3 ct/kWh of the generated electricity would become a Germany-wide cap on the financial participation of municipalities and citizens.

Energy sharing from renewable energy plants via the public grid

Electricity Market Directive (EU) 2019/944 contains requirements on energy sharing which should have been implemented by the German legislator already by mid-2021. The ministry now presents a proposal (new section 42c EnWG)  that should enable end consumers (including individuals and micro, small and medium-sized enterprises within the meaning of Commission Recommendation 2003/361/CE) to share electricity from renewable energy systems using the public grid.

From 1 June 2026 onwards, the energy sharing system shall enable the shared use of electricity from renewable energy systems within the balancing area of a DSO. The system shall be extended to the balancing area of a directly adjacent DSO in the same control area from 1 June 2028 onwards. The regime will require contractual agreements between the co-users, in which, inter alia, a specific allocation key must be defined. Energy sharing will also require the use of smart metering systems.

The new regime will complement the already existing tenant electricity supply (Mieterstromverträge, section 42a EnWG) and common building supply (gemeinsame Gebäudeversorgung, section 42b EnWG) regimes and become another option for decentralized renewable energy generation and consumption.

What should I do next?

The ministry proposal will still be discussed within the cabinet. Comments from stakeholders which have been submitted in the meantime include the following: in view of the current number of grid connection requests, grid operators have expressed doubts that the detailed regulations can be implemented on time. On the other hand, the requirements for energy sharing are not yet considered detailed enough to make a significant contribution to the energy market. It therefore remains to be seen to what extent the current draft bill will be revised in the legislative process.