Flexible grid connection agreements - booster for the electricity storage industry?

I.   Background

The creation and integration of electricity storage capacities is an essential part of the energy transition. Thanks to their flexible and bidirectional operation, electricity storage systems can take electricity from the grid in times of oversupply and feed it back into the grid in times of increased demand. In a system that is increasingly based on fluctuating generation plants such as wind and solar power plants, electricity storage systems therefore enable a flexible and demand-orientated electricity supply. At the same time, electricity storage systems contribute to grid stability and are able to significantly mitigate or completely avoid grid congestions. [1]

Accordingly, the electricity storage sector has been experiencing a great deal of momentum for some time now, which is also reflected in concrete figures. Since 2022, when electricity prices rose sharply at times as a result of the Russian war of aggression against Ukraine, the German transmission system operators alone have received grid connection requests for battery storage systems with a total capacity of 161 gigawatts.[2] However, this dynamic corresponds to major challenges in the provision of the corresponding grid connections. This is because grid connection capacities are scarce and under the current regulatory framework- despite the provisions on connection priority[3] -, the connection of battery storage systems is regularly delayed by several years. [4]

These problems could be eliminated - or at least alleviated - by so-called flexible grid connection agreements, as provided for in the draft law amending the Energy Industry Act to avoid temporary generation surpluses[5] (hereinafter referred to as the Draft Act). Thus, the legislator intends to accelerate the provision of grid connections for all types of systems, although flexible grid connection agreements are likely to be of particular interest for the rapid connection of electricity storage systems. In this context, the draft legislation also proposes a framework for the integrated grid connection of renewable energy installations with corresponding electricity storage systems.

II. Functionality of flexible grid connection agreements

Flexible grid connection agreements should enable grid operators to limit the feed-in from installations to a specific amount. In this way, systems could be connected to favourable grid connection points that would not be available without limiting the feed-in capacity or would only be available subject to further grid upgrades, leading to an acceleration of the overall grid connection of the respective installations. In addition, flexible grid connection agreements would provide a framework for connecting different types of installations to the same grid connection point without this grid connection point having to be available for the maximum output of all connected installations (so-called Cable Pooling). The standardised framework for this cable pooling would specifically enable the rapid and efficient establishment of a grid connection for renewable energy systems with an integrated electricity storage concept.

The Draft Act provides for two regulations with framework conditions for flexible grid connection agreements

• A provision in the newly inserted Section 17 (2b) of the German Energy Industry Act (Energiewirtschaftsgesetz – EnWG) (Section 17 (2b) EnWG-E) for all types of installations in accordance with Section 17 (1) sentence 1 EnWG
• a provision in the newly inserted Section 8a of the German Renewable Energies Act (Erneuerbare-Energien-Gesetz – EEG) (Section 8a EEG-E) for installations within the meaning of Section 3 No. 1 EEG.

From a systematic perspective, Section 17 (2b) EnWG is the relevant regulation for electricity storage systems. In general, electricity storage systems that exclusively absorb electricity from renewable energy sources or mine gas and convert it into electrical energy are also installations within the meaning of Section 3 No. 1 EEG, in addition, Section 8a EEG-E is lex specialis compared to Section 17 (2b) EnWG-E pursuant to Section 17 (2b) sentence 4 EnWG-E.[6] However, only Section 17 (2b) EnWG-E provides for flexible grid connection agreements for both the withdrawal and feed-in of electricity - and thus for the bidirectional operation of electricity storage systems - while Section 8a EEG-E only provides for flexible grid connection agreements with regard to the feed-in of active power (for more details, see section 1)

1. 1.    Basic requirements for the conclusion of flexible grid connection agreements

2.  

3. 1.1    Definition and types of flexible grid connection agreement

A flexible grid connection agreement is defined in Section 17 (2b) sentence 2 EnWG-E as an agreement that gives the operator of electricity supply grids the right to demand a static or dynamic limitation of the maximum withdrawal or feed-in power from the connection recipient. Section 8a (1) EEG-E defines flexible grid connection agreements - largely congruent - as an agreement between the grid operator and the system operator to limit the maximum active power feed-in to the grid on the connection side. Hence, the main content of a flexible grid connection agreement is that the respective installation operator cannot permanently utilise the grid connection capacity to which it is generally entitled.

Section 17 (2b) EnWG-E and Section 8a (1) sentence 3 EEG-E allow for both continuous and temporary feed-in limitation, whereby the level of limitation can also vary depending on the period. The legislator distinguishes between three forms of feed-in limitation:[7]

• Static power limitation: With this form of power limitation, the grid connection power is available for the duration of the flexible grid connection agreement at a constantly specified maximum value below the installed system power.
• Dynamic power limitation: With this form of power limitation, the grid connection power can be utilised at different levels in time windows defined and planned in advance by the grid operator.
• Fully dynamic capacity limitation: With this form of capacity limitation, the grid connection can generally be used to the extent of the maximum grid connection capacity - however, the (distribution) grid operator is given the right to limit the amount of the connected load, if necessary to an agreed lower limit, depending on the utilisation, in order to enable higher utilisation at times when there are no bottlenecks.

1.2    Minimum content requirements for flexible grid connection agreements

Section 17 (2b) sentence 3 EnWG-E and Section 8a (2) sentence 1 no. 1 - 5 EEG-E standardise - largely congruently - general minimum content requirements for flexible grid connection agreements. Accordingly, flexible grid connection agreements must always contain the following provisions:

• Amount of the withdrawal or feed-in capacity (Section 17 (2b) sentence 3 no. 1 EnWG-E) or the limited maximum active power feed-in (Section 8a (2) sentence 1 no. 1 EEG-E);
• Period or periods of limitation of the withdrawal or feed-in power (Section 17 (2b) sentence 3 no. 2 EnWG-E) or time windows with (possibly) different limits on maximum active power feed-ins (Section 8a (2) sentence 1 no. 2 EEG-E);
• Duration of the flexible grid connection agreement (Section 17 (2b) sentence 3 no. 3 EnWG-E) or duration of the limitation and, if applicable, subsequently applicable regulations (Section 8a (2) sentence 1 no. 3 EEG-E);
• Ensuring the technical requirements for the limitation (Section 17 (2b) sentence 3 no. 4 EnWG-E and Section 8a (2b) sentence 1 no. 4 EEG-E);
• Liability of the subscriber or system operator if the limitation is exceeded (Section 17 (2b) sentence 3 no. 5 EnWG-E or Section 8a (2) sentence 1 no. 5 EEG-E).

The aforementioned provisions form a regulatory framework that enables the limited provision of grid connection capacity in cases in which the existing grid connection capacity is not or initially not sufficient for the desired grid connection.[8] For example, installations for which grid expansion measures would generally be necessary due to the respective feed-in capacity can be connected to the grid before such measures are completed - and therefore regularly much earlier - and at a more favourable connection point, while accepting a lower connection capacity. The fact that the duration of the limitation must also be specified in the corresponding agreement clarifies that the limitation of the active power feed-in should not apply for the entire operating phase of the respective installation, but only temporarily and at most for the duration of the flexible grid connection agreement.

2.   Possibility of Cable Pooling

Section 8a (1) sentence 1 no. 6 and sentence 2 EEG-E also contains the framework conditions for Cable Pooling.[9] Accordingly, the flexible grid connection agreement must contain the following provisions in addition to the above-mentioned minimum requirements in the event of intended Cable Pooling:

• Regulations on the consent of other installation operators or operators of electricity storage systems whose installations or electricity storage systems are already connected or are to be connected via the same grid connection point (Section 8a (2) sentence 1 no. 6 EEG-E);
• Supplementary provisions on the joint responsibility of the system operators or operators of electricity storage systems for compliance with the rules of the flexible grid connection agreement and on joint and several liability if the respective limitation is exceeded (Section 8a (2) sentence 2 EEG-E).

Remarkably, by referring to electricity storage systems (as with the regulations on mixed-use electricity storage systems in Section 19 (3a) and (3b) of the EEG), the legislator provides for requirements for a type of system that - depending on its specific use - is not covered by the basic scope of the EEG. This is because electricity storage systems only fall under the definition of an installation in accordance with Section 3 No. 1 EEG if they absorb energy that comes exclusively from renewable energies or mine gas and convert it into electrical energy. Given the wording as set forth in Section 8a EEG-E, however, the legislator also facilitates operating electricity storage systems – that are installed as part of an integrated system concept together with a renewable energy installation and feed in at the same grid connection point using a flexible grid connection agreement – as a stand-alone asset. Although at first glance it appears systematically not entirely coherent to introduce such provisions on mixed-use electricity storage systems in the EEG, it makes sense in this context and is generally to be welcomed, particularly in view of practical considerations for project developers of integrated concepts of renewable energy installations and battery storage systems.

III.   EU background

Section 17 (2b) EnWG-E and Section 8a EEG-E serve to transpose Art. 6a of Directive (EU) 2019/944 on the improvement of electricity market design - inserted by Directive (EU) 2024/1711 (amended Internal Electricity Market Directive). This requires Member States to ensure a legislative framework for flexible grid connection agreements by transmission and distribution system operators in areas of low or non-existent grid capacity. The corresponding design of Section 17 (2b) EnWG-E and Section 8a EEG-E essentially covers the requirements of Art. 6a of Directive (EU) 2019/944 on flexible grid connection contracts. According to Art. 3 of Directive (EU) 2024/1711, the member states must have implemented the European legal requirements by 17 January 2025.

IV.   Overall assessment

The instrument of the flexible grid connection agreement, as provided for in Section 17 (2b) EnWG-E and Section 8a EEG-E, is in principle a sensible and pragmatic addition to grid connection regulation. The approach enshrined therein is generally suitable for accelerating the provision of grid connections, as a limited grid connection can be provided before the completion of any lengthy grid upgrading measures. Electricity storage systems in particular are likely to benefit from this, as they are not dependent on the permanent provision of full grid connection capacity to the same extent as other types of installations due to their flexible operation and the underlying economic considerations.

In addition, the extension of the provisions in Section 8a EEG-E to include mixed-use electricity storage systems is to be welcomed, as it gives operators of electricity storage systems greater flexibility with regard to the utilisation concept for their systems.

However, as stakeholders from the industry have rightly pointed out, the regulation does not go far enough.[10] In particular, due to the specific wording of Section 17 (2b) EnWG-E and Section 8a EEG-E, it is ultimately at the discretion of the grid operators whether the opportunities offered by the use of a flexible grid connection agreement are actually utilised. In this respect, a general right of the connection petitioner against the grid operator to conclude a flexible grid connection agreement would be more expedient.[11]

Ultimately, however, the possibility of a flexible grid connection agreement cannot completely overcome the factual problem that only limited grid connection capacities are available overall due to a stagnating grid expansion. As a result, the rapid establishment of a grid connection for an electricity storage system is unlikely to offer any added value if only a very small proportion of the planned capacity is provided or the capacity is not available at times when the use of the electricity storage system is economically most expedient. Ultimately, the practical application of flexible grid connection agreements - in particular the handling of this instrument by the grid operators - must show whether the regulations provided for in the Draft Act actually represent the desired "booster" for the grid connection of electricity storage systems and are capable of effectively reducing the difficulties described above.

V.   Outlook

In view of the upcoming federal elections on 23 February 2025, it is doubtful whether the Draft Act, and accordingly the regulations on the flexible grid connection agreement, will be passed by the end of the legislative period. There was no clear parliamentary majority in favour of the Draft Act during the first debate in the Bundestag on 20 December 2024. According to the minutes of the plenary session on 20 December 2024, the FDP parliamentary group refused to vote in favour of the Draft Act.[12] Although the CDU/CSU parliamentary group recognised the need for corresponding regulations, it clearly criticised the Draft Act as a whole - and as such also the proposal on the structure of the flexible grid connection agreements.[13]

On the other hand, in view of Germany's obligation to transpose the requirement to introduce flexible grid connection contracts into national law by 17 January 2025 (see section III above), it cannot be ruled out that Section 17 (2b) EnWG-E and Section 8a EEG-E will still be passed in the current legislative period - possibly in an amended form - despite the tight remaining timeframe and unclear majority situation in the Bundestag. If not, the new German government will likely introduce a corresponding act early on in order to avoid EU infringement proceedings. In any case, the introduction of a regulatory framework for the conclusion of flexible grid connection agreements can likely be expected in the near future. It therefore seems advisable for affected market participants to already take the regulations on flexible grid connection agreements into account in their respective project planning.

[1] On system usefulness and grid stability, see also the statement by the German Energy Storage Systems Association (BVES) on the BMWK's draft electricity storage strategy of 16 January 2024, p. 7 f., available at: https://www.bves.de/wp-content/uploads/2024/02/PM_Grossspeicherkonferenz_20240201.pdf; see also the electricity storage strategy of the Federal Ministry for Economic Affairs and Climate Protection (BMWK) of December 2023 on the necessity of electricity storage contributing to system stability, p. 6, 16 et seq, available at: https://www.bmwk.de/Redaktion/DE/Downloads/S-T/stromspeicherstrategie-231208.pdf?__blob=publicationFile&v=8.

[2] Cf. Tagesspiegel background article ""Ampel-Aus brakes battery tsunami" from 2 January 2025, available at: https://background.tagesspiegel.de/energie-und-klima/briefing/ampel-aus-bremst-batterie-tsunami.

[3] See Section 17 (2a) EnWG.

[4] Cf. the FAZ report "Deutschlands Stromnetz vor Kollaps schützen: Das Problem der Mega-Batterien" of 2 December 2024, available at: https://www.faz.net/aktuell/wirtschaft/stromnetz-in-deutschland-droht-der-kollaps-durch-mega-batterien-110142951.html, in which a project developer reports waiting times of 24 to 30 months or outright cancellations; see also the statement by the Managing Director of BVES following the BMWK grid connection summit on the issue of grid connection in a press release dated 16 April 2024, available at: https://www.bves.de/wp-content/uploads/2024/04/PM_Netzanschlussgipfel.pdf.

[5] Gesetz zur Änderung des Energiewirtschaftsrechts zur Vermeidung von temporären Erzeugungsüberschüssen, BT-Drs. 20/14235, available at: https://dserver.bundestag.de/btd/20/142/2014235.pdf.

[6] See also the official explanatory memorandum on Section 17 (2b) EnWG-E, BT-Drs. 20/14235, p. 54.

[7] See the official explanatory memorandum on Section 17 (2b) EnWG-E and Section 8a EEG-E, BT-Drs. 20/14235, p. 55, 69, 70.

[8] Official explanatory memorandum on Section 8a EEG-E, BT-Drs. 20/14235, p. 55, 69.

[9] Official explanatory memorandum on Section 8a EEG-E, BT-Drs. 20/14235, p. 69, 70; the legislator considers Cable Pooling a special case of the flexible grid connection agreement.

[10] Cf. statement by BEE Association Managing Director Wolfram Axthelm, quoted in Tagesspiegel background article "Ampel-Aus bremst Batterie-Tsunami" from 2 January 2025, available at: https://background.tagesspiegel.de/energie-und-klima/briefing/ampel-aus-bremst-batterie-tsunami.

[11] In this respect, see also the BEE statement on the draft bill to amend energy industry law in the area of end customer markets, grid expansion and grid regulation of 25 October 2024, available at: hhttps://www.bee-ev.de.

[12] Plenary protocol 20/208, 26916 German Bundestag - 20th electoral term - 208th session, 20 December 2024, Member of Parliament Konrad Stockmeier, p. 17f.

[13] Plenary protocol 20/208, 26916 German Bundestag - 20th electoral term - 208th session, 20 December 2024, Member of Parliament Andreas Jung, p. 8, Member of Parliament Artur Auernhammer, p. 13.