Grid stabilization requires more dynamism in grid charges

The following statement by our CEO Dr. Frank Schlichting on the grid-oriented control of controllable consumption devices (2nd consultation regarding Section 14a EnWG) was published in the Tagesspiegel Background on August 1, 2023.


The Federal Network Agency has taken a step in the right direction with proposals for grid-oriented regulation of controllable consumption devices, says Frank Schlichting of Kiwigrid. The incentive system, however, should allow for even more price and time dynamics when designing the rules of Section 14a of the Energy Industry Act.

Last week saw the end of the second consultation on the amendment to the rules surrounding Section 14a of the Energy Industry Act, which governs the grid-oriented regulation of controllable consumption devices. It is now up to the Federal Network Agency to sift through the many comments from interested parties and weigh up the interests. In revisions made after the first round of consultation, the agency has already shown that it is willing to listen to market players. As a result, the current key issues paper on grid-oriented regulation of controllable consumption devices is already a real improvement.

The first draft put individual consumer control in an even better position than prosumer control, i.e. control over the entire grid connection. In this context, coordinated network reference is significantly more efficient than looking at individual consumers. With the second draft, the Federal Network Agency now exclusively uses the network-effective power purchase as a parameter. This means that households with several controllable consumption devices are no longer at a disadvantage. Prosumers, i.e. energy users who are at least partially self-sufficient, are thus granted greater freedom to design the efficient use of controllable consumers - which makes perfect sense.


Incentive pricing for users instead of consumer limits

Another improvement: In its first iteration, the key issues paper focused strongly on the shutdown of controllable consumption devices without proposing regulations and incentives for grid-serving consumption. The revision now takes into account electricity use that genuinely benefits the grid and recommends the introduction of an incentive system for consumers. Such an incentive system could make grid operator intervention a strict exception. Incentivized by price signals, users can adjust their electricity consumption variably and so proactively prevent bottlenecks in the distribution network and consumer curtailments. This is the right choice for power grids threatened by congestion today and in the foreseeable future.


An incentive system that is too rigid

But now onto the criticism: The Federal Network Agency is proposing fixed time windows and price levels for network charges, which were already set last year. We see urgent need for improvement both in structuring the times and prices and in the frequency of setting them, so as to fully exploit the potential of controllable consumption devices for stabilizing the grid.

To provide an effective incentive for grid-serving behavior, variable grid charges not only need a time window both for high tariffs, but also a significant time window for low tariffs - coupled with a significantly reduced pricing level. However, the current key issues paper only provides for mandatory high tariffs.

Only if the network charge is increased during periods of high network load and reduced during periods of low network load can the desired network efficiency be achieved. To avoid load peaks and grid overloads, we recommend a low tariff of no more than 50 percent of the standard tariff. Fears of new load peaks can be avoided by making the time window for the low tariff mandatory for several hours a day. As a result, the loads are distributed over this time window.


Short-term dynamic network charges for additional grid load reduction

The existing draft provides a one-time definition of the time windows and price levels once per calendar year for the following year. The resulting ability to plan for network operators and consumers undoubtedly has its advantages. At the same time, the Federal Network Agency refers to requests from the first round of consultations to introduce a real dynamic - but doubts its feasibility. With our technical expertise and practical experience as providers of energy management systems, we can dispel these doubts: short-term dynamic network charges can already be implemented today. An energy management system can easily incorporate corresponding tariffs and also settle them with the user.

For proactive grid load reduction, we therefore suggest supplementary dynamic incentives that reflect the expected consumption and grid load situation in real terms. This is only possible if short-term dynamics are built in, at least when designing the price levels. We therefore recommend that the network operator be given the flexibility to make adjustments at least to the price levels within predefined limits the day before. This would give the network operator additional control over network relief, to which users can respond at short notice. We should urgently exploit this potential for the sake of the power grid and its reliability. As a result, the guaranteed long-term planning capability is supplemented by short-term incentivization.

Despite my criticism and suggestions: We're heading in the right direction. With the proposed dynamic network charges, the German Federal Network Agency is initiating a turning point for electricity networks. However, we should dare to take more than just a tentative step toward grid efficiency with controllable consumption devices. In line with flexible electricity prices, we also need more dynamic network charges. Coupled with smart energy management, real dynamism could be a life insurance policy for the power grid.