Role and structure of the German regulatory authorities and the role of BNetzA in implementing the Energiewende

Transcription

1 Role and structure of the German regulatory authorities and the role of BNetzA in implementing the Energiewende Workshop Germany Brasil University of Campinas, March 13th 2013 Dr. Annegret Groebel, BNetzA Head of Department International Relations / Postal Regulation

2 Agenda 1. Presentation of BNetzA the German regulator 2. Energy regulation in Germany 3. German energy policy the Energiewende 4. New competencies for BNetzA synergies 5. Network Development Plan 2012: a) Consultation launched b) Grid expansion approved and submitted 6. Challenges and Next Steps 7. Conclusions Bundesnetzagentur

3 Introductory Remarks In Germany: Network industries traditionally were (legal) monopolies mostly owned by the state or regional municipalities or at least enterprises under huge state influence. Deficits resulting from the monopolistic structures led to the desire for more dynamics, higher efficiency and lower prices. Process of liberalisation was initiated by the European directives in order to open up markets for competition while the state influence was restricted to regulation in order to guarantee and safeguard competition. Process of legal market opening (liberalisation) will not work without economic regulation to ensure new entrants (competitors) can make use of new possibilities and compete effectively: (ex ante) regulation guarantees a level playing field! For effective regulation the NRA needs to be independent Independence is increased in the case of a multi-sector regulator Bundesnetzagentur

4 Overall Mission of Bundesnetzagentur to promote sustainable competition in the markets for electricity, gas, telecommunications, postal services and railways... via regulating these markets, i.e. market regulation by a regulatory body with ex-ante powers (to impose sector specific obligations) administrative body whose decisions are administrative acts (subject to juridical control) no micromanagement of markets, but pro-competitive regulation: setting conditions by implementing the rules and giving price signals in order to steer market forces towards a competitive market development as competition is the best driver for efficient investment and delivering benefits to consumers (more choice and more value for money) Bundesnetzagentur

5 Bundesnetzagentur: the German National Regulatory Authority Independent higher federal authority in the scope of the Federal Ministry of Economics and Technology Sector-specific regulatory authority tasked with ensuring effective competition in network industries: Telecommunications and Posts (since 1998), Electricity and Gas (since 2005), and Railways (since 2006) Electricity and Gas network planning (since 2011) BNetzA employs ar. 190 staff in energy regulation, up to 240 staff will be recruited for Electricity and Gas network planning Overall headcount for all sectors: ar staff HQ in Bonn Bundesnetzagentur 5

6 Organisation Chart BNetzA (1a) Bundesnetzagentur

7 Organisation Chart (1b) President Vice President Vice President Management Office President's Chamber (Ruling Chamber 1) Ruling Chambers Human Resource & Accounting Department Information Technology and Security Department for Economic Regulation Telecoms incl. numbering Department for Legal Telecoms Regulation, Frequency Manage. Department for Technical Telecoms Regulation incl. standadization Department for International Relations & Postal Regulation Department for Energy Regulation Department for Grid Planning (NABEG) Department for Railway Regulation 8 9 Regional Offices of BNetzA Bundesnetzagentur

8 Organisation of energy regulation inside BNetzA (1c) Department 6 Energy Regulation Ruling Chamber 4 Investment Measures Ruling Chamber 6 Access Electricity Grids 601 Economic Policy Issues 602 Incentive Regulation, Benchmarking 607 Gas Distribution Network Access 608 Electricity Transmission Network Access Ruling Chamber 7 Access Gas Networks Ruling Chamber 8 Grid charges, electricity Ruling Chamber 9 Grid charges, gas 603 Monitoring 604 Unbundling 605 Duties un. the Renewable Sources Act 606 Electricity Distribution Network Access Bundesnetzagentur 609 Gas Transmission Network Access 610 Grid Charges, Electricity 611 Grid Charges, Gas 612 Cooperation with State authorities 613 Grid Development

9 Organisation Chart (2) Internal Governance BNetzA headed by President and two Vice-Presidents nominated by government upon proposal of Advisory Council appointed by the President of Germany besides their responsibility to govern BNetzA, President and Vice-Presidents form the so-called President s chamber, a ruling chamber with legally defined competences with regard to market definition and analysis and frequency management Advisory Council members of Upper House of Parliament & Lower House of Parliament (democratic control) advise BNetzA on various issues Ruling Chambers key regulatory decisions executed by Ruling Chambers one chairperson and two vice chairs clear rules for ruling chamber proceedings hearings and oral proceedings participation in proceedings investigation rights independent rulings and strict administrative procedures Short timelines and decision stays effective when challenged in court Departments: Economic, Legal and Technical Department for telecommunications, departments for each of the other sectors, plus HR/accounting and IT department for all five sectors (synergies) as well as litigation office and press office responsible for all sectors Bundesnetzagentur

10 An Independent Regulator? What does independent mean? no influence by market players (no regulatory capture) no influence on daily business by ministry (no overruling) Regulator has to be impartial, i.e. take neutral decisions Problem: how to guarantee it? clear separation of functions rules that clearly define the roles / competencies clear assignment of powers (incl. enforcement) institutional set-up (organisational structure / governance rules) Bundesnetzagentur

11 An Independent Regulator! BNetzA is a higher federal authority in the scope of business of (but separate from) the Ministry of Economics and Technology Institutional set-up and rules, transparency: consultations oral hearings publication of docs Ruling chambers decisions independent (consistency requirement), no overruling by Ministry No control at all? Ministry can give (general) directives, but they have to be published BNetzA decisions subject to juridical review by independent courts Democratic oversight via the Advisory Council and accountability rules Bundesnetzagentur

12 Accountability Activity Report on status and development of telecoms and postal sector as well as for energy and railway sector to be submitted to the legislative bodies of Germany every two years ensures accountability Principles of administration to be published at regular intervals (transparency and predictability) Report of the Monopolies Commission to be submitted every two years to report whether there is effective competition in the telecoms + postal markets as well as in the energy and the railway markets (assessment of whether objectives have been reached) Bundesnetzagentur

13 Multi-sector regulation (1) General Advantages of a multi-sector approach: Regulatory capture can be avoided. Regulator can take its decisions based on a wider perspective. Broad expertise strengthens the regulator s role as professional policy adviser. Multi-sector competences strengthen the regulator s independence. Different levels of regulatory powers are levelled up to the strictest one! Advantages both in terms of professional decision-making as well as in organisational terms: realizing synergies and saving administrative costs Bundesnetzagentur

14 Multi-sector regulation (2) Advantages with regard to regulatory decisions Reflection of market realities Networks are increasingly converging. Struggling over competences between different authorities can be avoided. Synergies Similar questions arise in all sectors. Broad expertise can be used and shared/transferred. Expertise and experiences from other sectors can easily pour in regulatory decisions. Regulatory Consistency Close co-operation of experts from different sectors allows consistent regulatory approaches and measures. Bundesnetzagentur

15 Synergies (1) BNetzA s competence to regulate different infrastructure based sectors (network industries) allows for the creation of synergies and a broad discussion of regulatory issues as problems and tools to solve them are the same: pro-competitive market regulation that needs to be enforced with ex-ante access and price regulation Examples: BNetzA s telecommunications and energy experts have substantially contributed to the ongoing discussion about the determination of adequate capital costs in the railways sector (project team). BNetzA s experts for telecommunications standardisation are deeply involved in the work and discussion to develop smart grids in the energy sector. Rotating of staff members ensures knowledge transfer, particularly important where networks, services and markets converge BNetzA s responsibility for energy regulation and the network development plan facilitates new task of planning and permitting to speed up the necessary grid expansion Some departments are responsible for the authority as a whole: e.g. HR for all recruitments of BNetzA, IT for all IT services (synergies, cost saving) Bundesnetzagentur

16 Synergies (2) In the past 15 years regulation in Germany has provided for a stable framework and the promotion of effective competition and efficient investment. Transparent, reliable, predictable and proportionate regulatory decisions are crucial for attracting investors, which is particularly important now with the expansion of the electricity grid as well as the roll-out of highspeed broadband networks. Multi-sector competence and expertise is beneficial in converging markets and environments. In the case of new challenges a multi-sector regulator is better prepared and has the capability to - elaborate similarities, - transfer experience and knowledge, - prevent anti-competitive interference, - maintain flexibility. Bundesnetzagentur

17 Regulation vs. Application of competition law Competition law intervention: abuse of dominance (i.e. anti competitive behaviour) by dominant firms (ex- post intervention) ban on cartels (incl. some exceptions) (ex-post) merger control (ex ante/ ex post) No ex-ante price approval, but ex-post price examination by BKartA (NCA): usually prices of comparable competitive markets checking for margin squeeze Ex-ante powers of the national regulator BNetzA when applying regulatory law: ex-ante price control: prices based on costs of efficient service provision (stricter standard) ex-ante margin squeeze test Bundesnetzagentur

18 BNetzA & BKartA Example Energy (1) Utilities Generation End user supply Cartell Office (NCA) State Competition Autho. Network Federal Network Agency/ State Energy Regulators Bundesnetzagentur

19 BNetzA & BKartA Example Energy (2) Federal Network Agency (BNetzA/NRA): Network regulation under the Energy Industry Act, inter alia: approving network access charges ex-ante setting-up an incentive regulation scheme ensuring non-discriminatory network access and set access conditions taking steps against abuse of market power by network operators monitoring unbundling provisions setting fines, where appropriate Federal Cartel Office (BKartA/NCA): Application of competition law in generation/production and supply: Abuse of market power in wholesale markets, control of end-user prices, merger control Cooperation: each one has the right to comment on the draft decisions of the other and each one is obliged to inform the other of observations/findings that may be relevant for the fulfillment of the tasks of the other Bundesnetzagentur

20 Energy Industry Act - Independence of the Regulator BNetzA : seperate higher federal authority within the scope of business of, but separate from the Federal Ministry of Economics and Technology Staff and Management act independently (art. 35, art. 37(4) and (5) Electricity / Gas Directives) from any market interest do not seek or take direct instructions from any government or other public or private entity when carrying out the regulatory tasks Takes autonomous decisions: independence from any political body! Collaborate with EU regulators (CEER) Collaborate with the Agency for the Cooperation of Energy Regulators (ACER) Effective regulation requires an independent NRA Effective regulation on the European level requires a close cooperation among NRAs Bundesnetzagentur 20

21 National measures and European targets National legislation directly linked to the European targets and provisions: Renewables Energy Directive: 20/20/20 targets Internal Energy Market Package: integration of national markets into a European energy market (transposed with amended 2011 Energy Industry Act) 3. and implementation of IEM: European Network Codes and Market Coupling : Energy Infrastructure Package: connecting European energy infrastructure and integration of renewables National energy policy has an effect on the European level: both are interlinked! BNetzA cooperates closely with NRAs on EU level, both within CEER and ACER, e.g. informing both organizations early on about measures and impacts for cross-border trade Bundesnetzagentur 21

22 Network regulation in the energy market value chain Potentially competitive market segments No ex-ante regulation, ex-post supervision by the Competition Authority Generation Wholes ale trading Transport and distribution networks Supply Natural monopoly Regulation Separation of generation and supply activities from network operation (Unbundling) Network access regulation, including tariff regulation (incentive regulation) Limited responsibility of Bundesnetzagentur in comparison with other national energy regulators More recently, however, rapidly growing fields of activity recently, Bundesnetzagentur linked to the Energiewende 22

23 Energy Regulation the Legal basis Market opening already in 1998 (i.e. customers have the right to switch to another operator), but only in 2005 BNetzA was given ex-ante regulatory powers Energy Industry Act 2005 (Energiewirtschaftsgesetz EnWG) Unbundling: isolate the network from the other activities to neutralize the monopoly power and to prevent discriminatory behavior as well as cross-subsidization Third party access Ex-ante regulation of network charges: Electricity Network Tariff Ordinance and (Stromnetzentgeltverordnung StromNEV) Gas Network Tariff Ordinance (Gasnetzentgeltverordnung GasNEV) Incentive Regulation Ordinance (Anreizregulierungsverordnung ARegV) Bundesnetzagentur

24 Liberalization Aims of the new Energy Industry Act 2005 measures aims neutralization of the energy grids unbundling non-discriminatory access and usage Ex-ante approval of network tariffs by the Bundesnetzagentur Bundesnetzagentur 24

25 Liberalization German energy market since 2005 Introduction of the Energy Industry Act 2005 New Energy Industry Act 2005 aims at a secure, low-priced, consumer-friendly, efficient, and environmentally compatible supply of electricity and gas. Responsible regulatory authority: Bundesnetzagentur Federal Network Agency (less than costumers: fall in the responsibility of the Energy State regulatory authorities) Unbundling: strict separation between transmission/distribution network and all other parts of the value chain) Non-discriminatory third-party access to energy networks as the basis for the development of competitive markets Ex-ante approval of grid charges Since 2005 the following basic split of competences between the Federal authorities (national level) applies: Federal Network Agency: Network regulation Federal Cartel Office: Generation/production and supply (e.g. abuse of market power in wholesale markets, plus merger control, but no longer supervision of the grids) Bundesnetzagentur 25

26 Division of labour: Federal vs. State level (1 ) Split of regulatory competencies in a dual approach State level competence for networks with fewer than customers State level competence for networks not crossing State borders Energy State Regulatory Authorities control tariffs, system responsibilities, unbundling provisions, abuse proceedings BNetzA has sole responsibility for the national level and cross border (i.e. for EU level contact, cooperation with NRAs from other EU Member States) Transfer of competencies from the States to BNetzA possible (currently 6 out of 16 States have indeed transferred their competencies to BNetzA) Aim: Consistent regulation through a joint Committee of BNetzA and the 10 existing Energy State Regulatory Authorities However, this regards regulatory functions only, so far the permitting responsibility lied solely with the State Permitting Authorities (in general separate from the State Regulatory Authorities) Bundesnetzagentur

27 Division of labour: Federal vs. State level (2 ) Hamburg Nordrhein-Westfalen Hessen Rheinland-Pfalz Brandenburg Sachsen-Anhalt Sachsen Saarland Baden-Württemberg Bayern Bundesnetzagentur

28 Electricity Transmission System Operators TenneT (formerly E.ON Netz, acquired by TenneT, publicly-owned Dutch TSO, Ownership Unbundling) Amprion (subsidiary of RWE, a Vertically Integrated Undertaking) TransnetBW (subsidiary of EnBW, a Vertically Integrated Undertaking) 50Hertz (formerly Vattenfall Europe Transmission, acquired by Elia, publicly-owned Belgian TSO and IFM, an Australian investment fund, Ownership Unbundling) More than 10 gas TSOs, Circa 1600 electricity and gas DSOs Bundesnetzagentur 28

29 Distribution System Operators Ca. 866 electricity DSOs in public or private ownership, in addition to the 4 TSOs (plus 695 gas DSOs and 17 gas TSOs) Bundesnetzagentur

30 Energy regulation in practice Examples for BNetzA s activities: Approval of investment budgets/measures with regard to the connection of offshore wind farms to the transmission networks onshore. Guidelines concerning the induction of renewable energy into the transmission networks. Assessment of the effects resulting from the plan to take off nuclear power plants from the grid. Like in the telecommunications sector BNetzA also provides advice to the German Ministry of Economics and other decision makers as well as the legislator with regard the transposition of the European energy directives (2009 3rd energy internal market package) and the amendment of the German Energy Act. According to the energy package (approved 7/8 July 2011) BNetzA is responsible for the spatial planning procedures concerning the roll-out of supra-regional (interstate) and cross-border transmission lines) in order to accelerate the required extension of the networks. Closer coordination with regard to cross-border issues with NRAs of the Member States of the EU within ACER Agency for the Cooperation of Energy Regulators Bundesnetzagentur

31 Principles of incentive regulation (1) Incentive regulation is a reliable instrument for network regulation incentive for network operators to increase rate of return while reducing their costs: becoming more efficient leads to reduced network fees for consumers win-win-situation for all actors leads to comparable efficiency scores Bundesnetzagentur

32 Principles of incentive regulation (2) Advantages of incentive regulation no annual cost control, lesser bureaucratic burden automatic cost reduction incentive: Operators who beat or exceed the regulator s efficiency target generate higher returns than operators that perform less. cost reduction for network users (rebasement at the beginning of the 2nd period) Disadvantages of incentive regulation Risk for less efficient network operators (for example unprofitable network operation) Risk for network users (for example decrease in network investments and quality decrease), but this can be prevented by e.g. investment budgets and with quality regulation, thus incentive regulation can be designed in such a way that the necessary investment takes place while operation becomes more efficient and quality of service is maintained Bundesnetzagentur 32

33 Rationale of incentive regulation (1) 21a EnWG and Incentive Regulation Ordinance (ARegV) Set two regulatory periods with a duration of 5 years each (first regulatory period for gas operators to last 4 years only) Longer planning horizon for operators Decouples revenues from costs: More efficient companies are granted higher returns, less efficient companies receive lower returns Regulator seeks to incentivise network operators to identify further economies and increase profits, customers also benefit from efficiency increase Revenue cap set for each calendar year of the regulatory period (thus revenue path ) Revenue cap price cap: Avoids giving network operators an incentive to increase sales Start of 1st regulatory period: 2009 Bundesnetzagentur

34 Cornerstone: Individual efficiency targets Regulatory authority must set individual efficiency requirements based on the relative efficiency of each network operator by means of an efficiency benchmarking on the basis of suitable efficiency benchmarking methods, to apply both Data Envelopment Analysis DEA and Stochastic Frontier Analysis SFA; with standardised (irrespective of different asset age structures, amortisation approaches and capitalisations) and non-standardised capital costs. Regulator must use best-of-four-methods -result Individual efficiency requirement must be set at a level allowing the network operator to achieve and exceed it, using all possible and reasonable measures Minimum efficiency ( floor ) set by law at 60%, hardship clause DSOs may choose a simplified procedure with efficiency score pre-set at 87.5% Bundesnetzagentur

35 Rationale for incentive regulation (2) Allowed revenues Initial and final cost appraisal Actual cost Decoupling of revenues and costs: Operator may keep cost reductions below the revenue path during the regulatory period. Regulatory period Year 0 Bundesnetzagentur Regulatory period Year 5 Re-Assessment of costs (Year 4 in gas)

36 Incentive Regulation - Formula Incentive regulation since 2009 Implemented to provide incentives, both CAPEX and OPEX are subject to incentive regulation Revenue cap regulation with efficiency benchmark RC C t nc1, t Infl t C nc2,0 1 A t C c, 0 PF t EF t Q t Infl 0 Cost components Controllable costs Non-controllabe costs 2 (e.g. structrual parameters) Non-controllabe costs 1 (e.g. taxes) Efficiency comparison Allocation factor for inefficiency reduction A t = t/10 for the first regulatory period Inflation rate Productivity factor Expansion factor Quality element Bundesnetzagentur

37 Investment budgets/measures (1) - 23 ARegV While DSOs may primarily benefit from the Expansion Factor, TSOs may apply for Investment budgets for expansion projects: Connection of offshore-facilities to the grid grid extension measures to connect new power generation integration of Renewable Energy/Cogeneration facilities development of the gas transport capacities between market areas development of interconnection capacities underground cables restructuring measures to ensure technical network security cable temperature monitoring and operation of high temperature cables Individual applications will be checked ex ante for costs and the necessity of the project Approved costs will be treated as non-controllable costs for one or two regulatory periods in general, i.e. increasing revenues directly Bundesnetzagentur

38 Investment budgets/measures (2) = Costs of expansion investment in 2010 and following years Allowed Revenues in the first Regulatory Period New revenue path including additional expansion costs and efficiency targets Base year for Revenue Cap Year Bundesnetzagentur

39 The Energiewende The change of Energy policy in Germany after Fukushima and the Role of the Regulator Bundesnetzagentur

40 Nuclear Phase-Out in Germany (1) shut down operating On 15 March 2011, the German government announced to shut down 8 of its 17 reactors immediately, i.e. all reactors that went online before 1981 On 30 May 2011, the government plan to progressively shut down all nuclear reactors by 2022 and massively foster the development of renewable energy production By % of the production with renewables Consequences on the grid stability analyzed by BNetzA - Report on our website Bundesnetzagentur 40

41 Nuclear Phase-Out in Germany (2) Following the Fukushima catastrophe, the orientations set in 2010 have been complemented by an accelerated nuclear generation exit (previously foreseen for 2036) 2015 Moratorium imposed by the Government on the eight oldest nuclear power plants immediately after the Fukushima catastrophe rendered permanent Nuclear power plants Date of decommissioning Already decommissioned Closure of the remaining nine nuclear power plants by 2022 Bundesnetzagentur 41

42 Energiewende Political process Important that the previous Socialdemocrat/Green Party government under Chancellor Schröder had launched the slow phase out of nuclear power to be replaced by renewables already When Merkel was reelected in 2009 she reversed this approach by prolonging the time nuclear power plants were allowed to run When Fukushima happened, Merkel was shocked as obviously all the safety measures failed and ordered (overnight) a shutdown of the 8 oldest nuclear power plants ( moratorium ) In the following discussions she had to convince her own party more than the opposition which favoured the phase out of nuclear power anyhow, thus the Green Party was in favour as were the Socialdemocrats Important to remember that without the original shift towards renewables, Merkel would not have been able to push through the Energiewende which consisted of a package of 8 new or amended laws Bundesnetzagentur

43 Effects of the Energiewende Change on the generation level away from conventional and nuclear power to renewables as well as the shut down of nuclear power plants after Fukushima caused a number of effects on the electricity grid: Short term: more redispatching measures needed to stabilize the grid (more critical situations) and temporary change in the direction of cross-border electricity trading: Germany became a net-importer for a while whereas it usually is a net-exporter Middle term: more efficient use of existing capacities Long term: grid expansion and reinforcement plus smart grid development on the distribution level Long term: smart market development and increase of energy efficiency (energy savings) Bundle of measures on both the transmission and distribution level as well as on the demand side Bundesnetzagentur

44 The German Energy Package 2011 Legislative measures 8 new laws or amendments to existing laws adopted in July 2011 Atomic Energy Act phase-out of German NPPs Act to Accelerate the Expansion of the Grid including acceleration of spatial planning (NABEG) to speed up grid expansion Energy Industry Act transposition of 3rd Internal Energy Market Directives (enforcing stricter unbundling rules: OU, ISO, ITO and new monitoring tasks) Renewable Energy Sources Act (EEG) cost-efficient expansion of renewables Energy and Climate Fund Act from 2013 all revenues from auctioning emission allowances will be a contribution to this fund Energy efficiency i.e. tax concessions for renovation of buildings; climate-friendly development of cities and municipalities; public procurement entered into force: the 4 th and 6 th August 2011 Range of new provisions to implement the Energiewende given to BNetzA! A long process with impact on its neighbors Bundesnetzagentur 44

45 Grid Expansion Acceleration Act (NABEG) Grid Expansion Acceleration Act speeds up the permit procedures for necessary high voltage power lines (in the past processed by the State Permitting Authorities, took up to 10 years) now: Federal Network Agency in charge for inter-state (trans-regional) connections (max. 5 years between application and final decision) coordination between the national and European 10-year-network-development-plan (completion of the European internal energy market) Bundesnetzagentur 45

46 Renewable Energy Sources Act (EEG) Basis for the success of renewable electricity in Germany is the Renewable Energy Sources Act (Act on granting priority to renewable energy sources, Erneuerbare-Energien- Gesetz, EEG) EEG entered into force in 2000 and has been amended several times Purpose of the EEG: Facilitating a sustainable development of energy supply by promoting the development of technologies for the generation of electricity from RES Objective: Increasing the share of renewables in electricity supply to at least 35 % by 2020 and continuous increase thereafter (up to 80 % in 2050) Bundesnetzagentur 46

47 EEG-related tasks of the regulator BNetzA must inter alia monitor: the transfer of renewable electricity and tariffs including the marketing of such electricity by the TSOs, calculating and claiming the EEG-surcharge by the TSOs in case BNetzA has a legitimate doubts, audits of installation operators may be conducted compliance of Grid System Operators with feed-in management rules; BNetzA may set further feed-in management guidelines Additional task: Calculation of the feed-in tariffs for PV installations Bundesnetzagentur 47

48 Germany s Energiewende (energy turnaround) Action plan adopted by the Federal Government in 2010 National targets Reduction of greenhouse gas emissions (in comparison with 1990) 40 % 55 % 70 % % Share of renewable energy in final energy consumption 18 % 30 % 45 % 60 % Share of renewable energy in electricity generation 35 % 50 % 65 % 80 % Reduction of primary energy demand (in comparison with 2008) 20 % 50 % Bundesnetzagentur 48

49 Germany s Energiewende (energy turnaround) Ambitious targets on Renewable energy, energy efficiency and electricity imports 640 in TWh % share of renewables 90 Electricity generation Energy efficiency increase Electricity demand + > 300% Electricity imports Domestic electricity generation Conventional electricity generation Renewable energy generation 80% share of renewables Bundesnetzagentur 49

50 Renewable Energy Targets Electricity Production Government Energy Policy: Share of electricity produced by renewables to rise to 35 % by % by 2050 Renewable Energy Act (EEG) designed to foster this process NABEG to speed up grid expansion and ensure integration of renewables Hard coal 18.6% Nuclear 17.6% Electricity Mix Germany 2011 Renewables: 19.9 % Natural gas 13.7% Lignite 24.9% Oil1.1% Other 4.2% Renewable energy sources: 19.9% Source: AG Energiebilanzen Bundesnetzagentur

51 Key Challenge: Grid expansion for the Integration of the Renewables wind energy Quelle: sigma biomass power plants Quelle: Alpha Ventus grids climate-neutral buildings photovoltaics Quelle: Spiegel Quelle: Kurier.at Quelle: VDE storage power stations Electric mobility Bundesnetzagentur Quelle: Vattenfall CCS systems

52 Changes in Generation Require New Grids (1) Renewable energy production develops mainly in Northern Germany, esp. wind Traditionally, fossil and nuclear production plants have been built close to where the energy was actually needed, i.e. where most of the industrial load is located: in Southern/Western Germany.. Renewables Bundesnetzagentur and Grid Expansion 52

53 Changes in Generation Require New Grids (2) wind offshore 2021 wind onshore Main generation Increase by 2022: MW 2022 Scenario B 2021 Increase by 2022: MW Scenario B solar Nuclear power plants Increase by 2022: MW Scenario B planned shut down shut down Main load Bundesnetzagentur

54 Changes in Electricity Generation Require New Grids (3) wind offshore 2021 wind onshore Expansion and reinforcement of the networks urgently needed Increase by 2022: MW Scenario B gas-fired plants Increase by 2022: MW Scenario B solar Transmission system Offshore wind farm connection Modernization of the distribution system Increase by 2022: MW Scenario B Nuclear power plants planned shut down shut down Increase by 2022: MW Scenario B Investments needed of approx. 30 to 50 billion until 2020 (DENA-II study) New competences for BNetzA: a new role beyond regulation! Bundesnetzagentur 54

55 Reasons for Network Development: Underlying transformation of the energy system German Energiewende package 2011 Rapid expansion of renewables: 80% wind, solar and biomass by 2050 Nuclear phase-out by 2022 Reduced electricity consumption as a result of increased efficiency Increased cross-border electricity trading Consequences for the network Volatility of consumption and production in terms of both time and location reduces predictability and requires higher resilience Average distance between production and consumption increases Volatility of the network situation increases: more difficult to manage Network development (grid expansion) is a clear priority: to speed the process up BNetzA was given new competencies Bundesnetzagentur

56 How will BNetza work on this? Implementation of EnWG 2011 and NABEG: BNetzA is building up competence in network modelling and network planning specialist planning and plan approval environmental issues and procedures of participation Around 240 new colleagues being recruited Connection between the new tasks and energy regulation issues synergies and bundling of competence Cooperation with Laender level: consistent decisions Bundesfachplanungsbeirat Kapazitäten und Netze Herausforderungen für die Versorgungssicherheit Bundesnetzagentur 56

57 New network development process: From scenarios to plans and permits Scenarios Network Development Plan Federal Requirements Plan Corridor permitting Line path permitting BNetzA approved TSO scenario framework TSO consulted on draft Network Development Plan BNetzA consults on revised TSO NDP BNetzA to confirm NDP and draft a Federal Requirements Plan Legislator to adopt Federal Requirements Plan TSOs to submit permitting applications Kapazitäten und Netze Herausforderungen für die Versorgungssicherheit Bundesnetzagentur 57

58 Enhancement of Network Development 10-year network development plan ( NEP /TYNDP) Planning of crossborder and interstate transmissi on system corridors by BNetzA Option for Permitting Procedure s for BNetzA Network development as a transparent concept under federal supervision of BNetzA Faster permit procedures are on the way in Germany legislation passed in June 2011 Network expansion is clearly decided: of highest public interest Kapazitäten und Netze Herausforderungen für die Versorgungssicherheit Bundesnetzagentur 58

59 Process leading to the Network Development Plan Draft Scenario Framework by TSOs Consultation Scenario Framework reflects the development of the energy policy framework (e.g. production capacities, consumption, etc.). It is the starting point to define the need for network development. Federal Requirements Plan reflects the need to develop the network in a concrete way Approval of the TSOs Scenario Framework by BNetzA Approved Scenario Framework Establishment of the Draft German Network Development Plan involving all TSOs by 3th June 2012 Consultation of German Network Development Plan and of the Environment Report by BNetzA Draft Federal Requirements Plan by BNetzA Federal Requirements Plan (Bundesbedarfsplan) Kapazitäten und Netze Herausforderungen für die Versorgungssicherheit Bundesnetzagentur 59

60 Network Development Plan: Involve the public Objective of the National Network Development Plan: Increasing local acceptance Prerequisite is improved transparency Consultation of network development plan on several stages: Include the public (especially the actual and potential users) with 6 townhall meetings Acceptance of public: overcome NIMBY Kapazitäten und Netze Herausforderungen für die Versorgungssicherheit Bundesnetzagentur 60

61 Consultation of the German Network Development Plan Consultation of the NEP 2012 started on 6 September lasting until 17/10/12 All in all 3,800 km of new transmission lines are needed (current total: 17,500 km) The Network Development Plan, consulted on and modified by the four transmission system operators, sets out the nationwide expansion measures for the grid up to 2022 / 2032 that are needed to secure electricity supplies into the future. The Bundesnetzagentur with the help of TU Graz has made its first assessment of these which it has published in an accompanying document. Contains a total of 50 projects, 13 accepted in principle, the rest will be reviewed in parallel to consultation Strategic environmental assessment: BNetzA is taking protection of the environment, too, extremely seriously 6 public hearings are scheduled to take place across Germany NEP and following from that the draft Federal Requirements Plan (containing the concrete corridors/routes) is expected to be adopted by end 2012 All information published on extra website: Kapazitäten und Netze Herausforderungen für die Versorgungssicherheit Bundesnetzagentur 61

62 Initial transmission network planning for 2022 Scenario B of draft TSOs NDP Contains all measures needed for a secure and reliable network system operation, contains time plan (prioritisation) of measures Recommends for the first time the use of HVDC to a considerable extent DC corridor A DC corridor C DC corridor B DC corridor D Kapazitäten und Netze Herausforderungen für die Versorgungssicherheit Key to map DC new build AG new build AC reinforcement Existing AC network NOVA principle Assessment of necessity of measures by BNetzA and of consistency with Europ. TYNDP Most important: North-South transmission lines to bring electricity from the Offshore wind farms in the North Sea to the industrial users concentrated more in the South of Bundesnetzagentur Germany 62

63 Electricity transmission network planning National Ten-Year Network Development Plan (TYNDP) prepared by the 4 TSOs for consultation, based on EU Directives Covers submitted to consultation end of May 2012 Based on generation/load scenarios Identifies requirements for network optimisation, improvement and expansion New AC links: 2800km on existing routes, 1700km in new routes For the first time, 2100km of DC links (10 GW capacity) in 4 corridors Cost estimated at 20bn euro over 10 years BNetzA consulted on the TYNDP and approved it with revisions TYNDP submitted as draft federal requirement plan to the Ministry of Economics on 26 Nov. 12 to be turned into federal law, spatial planning and line permitting for nationwide and cross-border transmission lines to follow to speed up permitting procedures On 19 Dec the Ministry published the draft Federal requirement plan law including competencies for BNetzA with regard to permitting of nation wide and cross-border transmission lines Kapazitäten und Netze Herausforderungen für die Versorgungssicherheit Bundesnetzagentur All information can be found online:

64 Results of BNetzA s assessment BNetzA for now only confirmed the need for: 51 out of 74 proposed projects Only 3 out of 4 proposed DC corridors were approved Overall 2800 km in new routes were confirmed, 2900 km reinforcement of existing routes AC 380 kv new build 3 HVDC corridors new build AC 380 kv reinforcements Kapazitäten und Netze Herausforderungen für die Versorgungssicherheit Bundesnetzagentur 64 64

65 One and a half year after not so optimistic any more, but still supported by 80% of the population But: it is a Generation project BNetzA to support the policy goals on the regulatory side and by using its new competences to shorten planning procedures ( OSS ) Grid expansion is a key issue Reduce congestion on transmission grids Integrate offshore wind production in the transmission grids Have smart distribution grids Tight time table can only be met if all parties involved cooperate as closely as possible each one playing its role Early involvement of public in every stage of consultation to overcome NIMBY effect as there is a general acceptance of nuclear shut down In the long term all elements must work together: grid expansion, smart grids and energy efficiency of users in a smart market design, probaby capacity mechanisms, process to be coordinated Close cooperation with all NRAs + ACER to reach European targets Bundesnetzagentur 65

66 Conclusions (1) The Energiewende requires the integration of renewables and thus an expansion and reinforcement of the electricity grid (both on the transmission as well as on the distribution level) requiring considerable investment The Energiewende will work only if the grid expansion is speeded up by shorter planning and permitting procedures as one of the main obstacles The Energiewende requires in the short term more redispatching measures of the TSOs to stabilize the grid New competences of BNetzA with regard to planning procedures for nationwide and cross-border electricity transmission lines: synergies as BNetzA is the energy regulator: OSS concept Shortening of planning and permitting procedures requires also a greater coordination both within Germany between the Federal and the Laender level as well as on the European level (European Energy Infrastructure Package of 27/11/12) Bundesnetzagentur

67 Conclusions (2) Acceptance of the users is essential: extensive consultation process started by BNetzA on 6 September 2012 of the NEP 2012 containing all grid expansion measures planned by TSOs (more than 3000 comments) NEP and draft Federal Requirements Plan approved by end of Nov by BNetzA and submitted to the Ministry of Economics on 26 Nov Necessity and obligation of operators to invest once the Federal Requirements Plan Law is finally adopted and legally binding, BNetzA to be responsible for permitting of nationwide and cross-border lines Incentive regulation is desgined in such a way that all new projects can be realized, attractive rate of return on equity of 9.05%, stable + predictable regulatory regime provides confidence to investors Tight time table, but so far BNetzA has delivered and performed the new tasks assigned with NABEG, the Energiewende is managable, but all players must cooperate as well as coordinate and join the effort! Overall, a strong independent regulator well resourced is essential Bundesnetzagentur

68 Summary and Outlook Introduction of ex-ante regulation through BNetzA with the 2005 Energy Industry Act was successful: Electricity tariff regulation is successful since 2005 Network tariffs (in particular for households) decreased since 2005 and switching increased Incentive regulation sets efficiency targets for cost reduction and ensures necessary additional investments in the future One of the major drivers will be the integration of renewables High quality and security of supply to be ensured in the future Substitution of the shutdown of 8 nuclear power plants in 2011 Withdrawal from the nuclear energy generation by 2022 Grid expansion to balance the increasing generation of renewable energy in the northern part of Germany and the lack of nuclear power capacity in southern Germany ( power transmission highways ) Bundesnetzagentur 68

69 Thank you very much for your attention Dr. Annegret Groebel Bundesnetzagentur Head of Department International Relations / Postal Regulation Tulpenfeld 4 D Bonn annegret.groebel@bnetza.de Bundesnetzagentur 69

70 A N N E X Kapazitäten und Netze Herausforderungen für die Versorgungssicherheit Bundesnetzagentur 70 70

71 Smarkt grid and smarkt market distinction Grid Smart Grid Smart Market Existing energy network (capacity KW ) Increase of transmission/distribution capacity for renewable energy needs by building new lines Upgrade of existing (distribution) grids by adding communication-, metering-, control- and automation technology + IT to enhance quality, efficiency and capacity of the grid Establishing technical prerequisites for markets (e.g. data hub) and establishing market rules beyond the grid intelligent Energy Markets (Trading of energy and energy-related services kwh ) Kapazitäten und Netze Herausforderungen für die Versorgungssicherheit Bundesnetzagentur 71

72 Political / regulatory action (Smart) Grid Smart Market Existing grid + intelligent grid control (adding ICT) Intelligent markets Increased energy trading and new services Prerequisite: Smart Meter and availability of consumption- and price data Natural monopoly requires regulation Liberalisation, deregulation and competition Kapazitäten und Netze Herausforderungen für die Versorgungssicherheit Bundesnetzagentur 72

73 Smart Grid Transmission grids are already smart today Where appropriate, enhancement of Smartness could be needed (monitoring of power lines, better information flow from DSOs to TSOs) Focus on new (conventional) power lines (Offshore connection, SuperGrid, corridors) Distribution grids have to become smart Network status / usage not really known Feed-in (amount and generation profile) of local generation not known No or little possibility for active switching operations Focus on refitting of grid with communication, metering, control, regulation and automation technology and IT components as well as expansion of grid Smart Grids vs. conventional grid expansion This is a entrepreneurial decision of the DSO (not the regulator) in line with incentive regulation Decision is dependent of many parameters (available technology, anticipated utilisation, capacity need due to business models of Smart Market etc.). Kapazitäten und Netze Herausforderungen für die Versorgungssicherheit Bundesnetzagentur 73

74 Smart Market smart generation smart consumption existing grid + intelligent control = Smart Grid smart metering smart storage Kapazitäten und Netze Herausforderungen für die Versorgungssicherheit Bundesnetzagentur 74

75 Network tariff developments Most recent developments: Transmission network tariff increases due to: capital costs of approved investment measures in the incentive regulation system for connecting offshore wind farms and reinforcing onshore lines cost for system services such as balancing, redispatch or the contracting of reserve power plants to ensure security of supply in winter are passed on to final customers Distribution network tariff increases due to: upstream transmission network tariff increases passed on to final customers remuneration for network tariffs avoided through decentralised feed-in use of the extension factor in the incentive regulation system retrofit costs for older PV to address frequency stability issues ( 50.2 Hertz ) Kapazitäten und Netze Herausforderungen für die Versorgungssicherheit Bundesnetzagentur 75 75

76 Network tariff developments Kapazitäten und Netze Herausforderungen für die Versorgungssicherheit Bundesnetzagentur 76 76

77 Retail electricity price developments ct/kwh Development of household electricity retail tariffs in (volume-weighted average across all tariff plans) ,93 4,66 2,48 7,30 20,08 5,26 2,58 6,34 21,39 5,47 2,81 5,92 22,75 23,42 25,45 26,06 6,21 6,11 5,68 5,79 5,18 5,42 2,91 3,71 5,80 5,81 5,75 6,04 5 4,49 5,90 7,19 8,36 8,10 8,41 8, Energy procurement & supply (incl. margin) Network tariff Surcharges and concession fees Taxes Kapazitäten und Netze Herausforderungen für die Source: BNetzA Versorgungssicherheit Monitoring data Bundesnetzagentur 77 77

78 Retail electricity prices Breakdown of the household electricity retail tariff in 2012 (volume-weighted average across all tariff plans) 8.2% 20.6% 24.1% 2.5% 7.9% 0.6% 0.0% 13.8% 6.4% 15.9% Network tariff Electricity tax Concession fee Co-generation surcharge (KWKG) Energy procurement Kapazitäten und Netze Herausforderungen für die Source: BNetzA Versorgungssicherheit Monitoring data Metering and billing Value-Added Tax Renewable energy surcharge (EEG) Network tariff reallocation charge ( 19StromNEV) Supply including supplier margin Bundesnetzagentur 78 78

79 Renewable energy support Kapazitäten und Netze Herausforderungen für die Versorgungssicherheit Bundesnetzagentur 79 79

80 EEG remuneration scheme 2013 Kapazitäten und Netze Herausforderungen für die Versorgungssicherheit Shares of individual cost positions Bundesnetzagentur 80 80

81 Retail electricity price developments in 2013 Overall level of fees, taxes and surcharges Offshore liability surcharge (from 2013) 2012: 11,7 ct/kwh +2,7 ct/kwh 2013: ca. 14,4 ct/kwh 19 StromNEV reallocation charge KWKG surcharge EEG surcharge Electricity tax Concession fee (average) Value-Added Tax ** estimate Kapazitäten und Netze Herausforderungen für die Source: BDEW Versorgungssicherheit Strompreisanalyse Bundesnetzagentur Oktober Seite 81

82 Hurdles that need to be overcome Planning and permitting procedures to be shortened: Implementation of a One Stop Shop BNetzA in charge of Approval of investment financing ( budget for new projects) Federal sectoral/spatial planning Plan permitting approval (if determined by ordinance requiring the consent of the Bundesrat ) Ownership unbundling requirements Investors are not interested in controlling rights, shareholder agreements are a common approach Traditional financial regulation which considers investments in energy infrastructure as risky (eg Solvency II) Kapazitäten und Netze Herausforderungen für die Versorgungssicherheit Bundesnetzagentur 82

83 Financing Grid Expansion Capital spending globally cautious but: investors look for attractive opportunities; stable economic data in Germany Considerable investment needs in power grid Regulatory framework in Germany is economically interesting and legally stable Bundesnetzagentur has done a lot to clear up any cases of doubt regarding the framework conditions Quelle: pixelio.de Kapazitäten und Netze Herausforderungen für die Versorgungssicherheit Bundesnetzagentur 83

84 How can all of this be financed? Basic principle: All Projects should be privately financed Network is refinanced by the users (rolled in network charges) In case a network operator is unable to organize the financing of the needed measures involvement of financial Investors possible No scarcity of capital, investment budgets/measures approved by BNetzA for all but one project Kapazitäten und Netze Herausforderungen für die Versorgungssicherheit Bundesnetzagentur 84