German market experiences of dealing with decentralised generators
In Germany, aided by government incentives, a significant volume of new decentralised (particularly solar) installations have been observed in recent years, although this trend is currently declining somewhat. By far the largest proportion of these solar systems are connected to the low voltage grid, which presents challenges in general to network operators and, in particular, to Distribution System Operators (DSOs) with regard to managing power flows on their grids.
The legal framework in Germany (section eight Erneuerbare-Energien-Gesetz (EEG)) includes the obligation for operators to connect each new solar installation on the network without restrictions. The challenges that this creates are mostly being managed technically through network measures and technical requirements imposed on network customers’ decentralised installations. In exceptional critical circumstances, operators are entitled to curtail solar generators to protect against power system failures or to prevent damage (section 14 EEG). Generators are compensated for lost revenue in case of curtailment. Nonetheless, operators are obliged to develop their networks in order to minimise curtailments (section12 EEG).
The key potential problems with decentralised (solar) plants are mainly avoided through the technical connection arrangements (eg specific, controllable inverters). In addition, in Germany, the network infrastructure in most regions is well developed and very robust, so no major upgrades have been needed, thus far, in distribution grids to accommodate the massive deployment of distributed energy resources. Controllable distribution transformers, which are already being tested in pilot projects, can also help to integrate large volumes of generation onto distribution networks. Currently, they are only applied in exceptional cases due to the high cost, but these may come down. The regulatory framework for charging, such as Electricity Grid Charges Ordinance (StromNEV) and Incentive Regulation Ordinance (ARegV), governs the allocation of additional grid costs to the network customers. Although only minor network measures are necessary now, it can be assumed that the costs will rise in the coming years due to the further expansion of the decentralised systems.
Technological progress in the next few years will bring smart storage solutions to manage peaks in generation output, and conversely peaks in demand. This may be supplemented by the development of flexible demand-side management solutions. The regulatory framework and targeted incentives could provide the means to support technological progress. Financial incentives for active network management could be considered, encouraging flexibility in generation, demand and storage to minimise adverse network impacts, both towards operators as well as network customers. Such incentives have to be in line with existing regulation, especially in light of the German regulator’s (BNetzA) current statement on a strict application of unbundling rules for low voltage grid connected storages. This could include the promotion of solar-storage hybrids, as well as intelligent energy management systems that may be facilitated by the planned introduction of smart meters in the coming years. Incentive programs, if properly designed, could help to bring a needed shift from the current load-independent infrastructure to load-dependent systems, like the above mentioned controllable distribution transformers.
From a regulatory perspective, no major planned changes in the next few years have been announced in Germany, but with upcoming European electricity market redesign measures, heralded by the European Commission in its roadmap, we expect further discussions in Germany and across Europe on how to manage DSO/TSO roles and incentives in supporting the energy transition. Technology may be part of the solution, as we saw in Germany, but new market arrangements which reward and incentivise flexibility from network users should also be considered. We are beginning to see novel market-based solutions being tested in the UK and other markets internationally, which may generate some interesting learnings.
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