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"With the latest amendment to the Energy Industry Act, the German legislature is providing new impetus for the better integration of renewable energy into the grid."
Particularly relevant for plant operators is the potential for capacity-exceeding grid connections and the introduction of flexible grid connection contracts. This is intended to mitigate the increasingly frequent problem of a lack of grid connection capacity. Recently, various planned renewable energy plants have not been able to connect to the grid due to bottlenecks or can only be connected late and/or at high cost. Through capacity-exceeding grid connections and flexible grid connection contracts, this obstacle can be partially eliminated or, at least, mitigated. Wind turbines, photovoltaic plants, electrolysers and battery energy storage systems can now be connected together.
Overall, the new legislation aims to address the potential for volatility in the production of electricity from renewable energy, though it is not limited to that sector.
The new regulations offer project developers and system operators new connection models and economic advantages as well as new contractual challenges.
Capacity-exceeding grid connections: more generation capacity despite grid restrictions
Previously, operators had to adapt their plant output to the available grid connection capacity. The new legislation now expressly permits capacity-exceeding grid connections, i.e. the installation of plants with a higher rated output than the actual available connection capacity at the grid connection point. This also applies to plants that are also connected to a grid connection point.
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"The new regulations offer project developers and system operators new connection models and economic advantages as well as new contractual challenges."
This offers a number of advantages:
- higher average grid utilisation: as generation plants rarely call upon their maximum output at the same time, there is unused potential that can now be exploited economically;
- better revenue opportunities: operators can generate higher revenues through optimised grid usage and more flexible marketing;
- cost efficiency: system operators save on grid expansion costs and avoid long waiting times for new grid connections; and
- acceleration: the grid connection of new plants is accelerated as there is no need to wait for a grid expansion at the planned locations.
Flexible grid connection contracts: Contractual safeguarding of capacity-exceeding grid connections
The possibility of capacity-exceeding grid connections is accompanied by the introduction of flexible grid connection contracts. These are contracts concluded between the grid operator and the plant operator. They must fulfil certain minimum legal requirements (see below) and primarily serve to ensure compliance with the maximum active power feed-in.
The new regulation on capacity-exceeding grid connections and flexible grid connection contracts can be found in the newly introduced sec. 8 para. 2 and sec. 8a of the Renewable-Energies-Act (EEG 2023).
a) Cable pooling
According to the basic rule of sec. 8 para. 2 EEG, the plant operators now also have the choice of a grid connection point that is already being used by an existing plant of another plant operator and/or another type of system, i.e. battery storage system. The permissibility of this so-called “cable pooling” is now set out in sec. 8 para. 2 sent. 2 EEG. It is intended to provide regulatory safeguards for what has already been implemented in practice in some cases.
The provision in the new sec. 8 para. 2 sent. 2 EEG extends the right of the plant operator under the previous sec. 8 para. 2 (now para. 2 sent. 1). The plant operator may also choose a grid connection point that is already used by an existing plant. The draft bill even speaks of a plant operator’s right to cable pooling. However, this wording should be treated with caution because the possibility of such cable pooling is limited, just as the plant operator’s right to another grid connection point is limited under sect. 8 para. 2 sent. 1: First, cable pooling is conditional on the grid operator not raising any grid operational objections to it, (see on this the explanatory memorandum to the draft bill, BT-Drs. 20/14235, page 71). In addition, the operator of the existing plant must agree to the shared use. It is not clear whether the consent requirement will in all cases also apply if the co-utilisation does not restrict the ownership and feed-in rights of the operator already connected. However, the wording of the legislative amendment does not further restrict the consent requirement of the operator of existing plants.
b) Flexible grid connection contract
If the grid connection capacity is exceeded through a cable pooling, a limitation of the maximum active power feed-in must be agreed between the plant operators and the grid operator.
The requirements for a so-called flexible grid connection contract are regulated in detail in the newly introduced sec. 8a EEG. The law specifies some (non-exhaustive) mandatory content for the contractual provisions of the flexible grid connection contracts:
- the obligation of the plant operators to comply with the active power limitation must be ensured at all times by suitable technical measures, which, sec. 8a para. 1 sent. 2, para. 2 no. 4 EEG;
- the liability of the plant operator if the maximum active power feed-in is exceeded; and
- the consent of other plant operators or operators of electricity storage systems, insofar as these are connected via the same grid connection point or are to be connected at the same time. In this case, the flexible grid connection contract must also include the following provisions:
- the joint responsibility of the operators for compliance with the provisions of the flexible grid connection contract; and
- the joint and several liability of all operators feeding into the grid together if the maximum active power feed-in is exceeded.
It cannot be ruled out that the Federal Network Agency will define more extensive regulations on flexible grid connection contracts in future. This is particularly true since Art. 6a of the Internal Electricity Market Directive, on which the new regulations in the EEG are based, expressly provides for a (regulatory) authority to develop a framework for flexible grid connection contracts. For the technical and economic conditions of a flexible grid connection contract this is explicitly provided for in the amended sec. 17 para. 4 EnWG.
"In future, the grid operator will be obliged to consider a flexible grid connection contract and inform the plant operator of the result of its review together with the result of the grid compatibility test, unless the technically and economically most favourable grid connection point is also the closest local grid connection point. "
In future, the grid operator will be obliged to consider a flexible grid connection contract and inform the plant operator of the result of its review together with the result of the grid compatibility test, unless the technically and economically most favourable grid connection point is also the closest local grid connection point. With this obligation, plant operators can ensure that the conclusion of flexible grid connection contracts is taken into account in planning from the very beginning.
If at least two different plant operators feed in jointly via cable pooling, the obligation to jointly comply with the flexible grid connection contracts vis-à-vis the grid operator requires a corresponding agreement between the plant operators (pooling agreement), which ensures coordinated feed-in in accordance with the flexible grid connection contract. This should also include a metering concept that allows the quantities of electricity fed in to be differentiated from one another, as well as regulations on how to deal with the grid connection capacity if some plants are decommissioned from cable pooling.
Figure: Contractual relationships for joint feed-in by two plant operators with a capacity-exceeding grid connection
Three basic types of feed-in limitation:
Three different basic types of flexible grid connection contracts result from the mandatory content requirements on the maximum active power feed-in and the (non-mandatory) possibility of also agreeing on time windows for different maximum active power feed-ins:
- static feed-in limitation: in the flexible grid connection contract, a grid connection limitation of a specified constant maximum value below the installed plant power is agreed;
- dynamic feed-in limitation: in the flexible grid connection contract, a grid connection limitation of different levels is agreed for predefined time windows (e.g. a lower feed-in of a wind turbine generator at midday in favour of a photovoltaic plant than during the rest of the time); and
- fully dynamic feed-in limitation: in principle, the flexible grid connection contract allows the maximum grid connection capacity to be fed into the grid – however, the grid operator is given the right to limit the feed-in, if necessary, to an agreed lower limit, depending on the specific utilisation. This enables higher utilisation at times when there is no grid capacity bottleneck.
Obligation of the grid operator:
Finally, the new regulation obliges the grid operator to consider the possibility of concluding a flexible grid connection contract if the grid connection at the nearest grid connection point is unavailable due to a bottleneck in the grid connection capacity.
"The new regulations on capacity-exceeding grid connections and flexible grid connection contracts offer plant operators considerable economic advantages but require careful contractual and technical planning."
What operators should look out for
When concluding a flexible grid connection contract, plant operators should check the following points in particular.
a) Availability and guarantees
- What minimum grid capacity is permanently guaranteed? Is there a maximum reduction that the grid operator is allowed to enforce
b) Remuneration
- Are operators remunerated for providing flexible feed-in?
- How is compensation regulated if the grid operator restricts the feed-in more frequently than planned?
c) Control and communication
- What technical requirements must plant operators fulfil?
- Who bears the costs for additional control equipment?
- Is sufficient differentiation from redispatch measures guaranteed?
d) Duration and customisation options
- How long is the contract valid and are there options for renegotiation?
- What cancellation rights exist for both parties?
Conclusion: seize opportunities, minimise risks
The new regulations on capacity-exceeding grid connections and flexible grid connection contracts offer plant operators considerable economic advantages but require careful contractual and technical planning.
We advise plant operators to carry out detailed economic and legal analyses before concluding a flexible grid connection contract. We would be delighted to support you on all regulatory matters and in reviewing and negotiating such a contract so that you can make the most of the new opportunities they present.
Contact us for advice!
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