Bundestag Approves 3rd Amendment of German Energy Act – Offshore Liability, Shutdown Restrictions for Conventional Power Plants, and More

Yesterday the German Bundestag (Parliament) approved the third amendment of the German Energy Act (EnWG). It contains new provisions regarding offshore wind power, in particular an offshore planning and an offshore liability regime. Besides, it gives the Federal Network Agency (BNetzA) the power to order power plant operators to postpone planned shutdowns of power plants to improve the security of supply in Germany. Other new provisions relate to the exemption of  pumped storage power plants from grid charges and interruptable loads (abschaltbare Lasten).

The bill (ref. nos. 17/10754, 17/11269) as amended by the Economics Committee of the Bundestag (ref. no. 17/11705) was adopted with the votes of the Conservative/Liberal government parties against the votes of the opposition.

I. New Offshore Regime

1. Liquidated Damages

According to the EnWG amendment, transmission system operators (TSO) may under certain conditions pass compensation payments for grid connection delays and disruptions of power lines that they owe to wind park operators on to the electricity consumers.

a. Liquidated Damages

The new Section 17e EnWG stipulates that an operational offshore wind farm shall in principle receive liquidated damages of 90% of the applicable feed-in tariff pursuant to the Renewable Energy Sources Act (EEG). In case of a grid connection delay, a prolonged disruption of a power line or maintenance work, this shall apply from the 11th day of continuous non-input of power or from the 19th day if the input is interrupted due to several individual interruptions totaling more than 18 days in each calendar year. Under certain conditions (see new Section 17e para. 2 last sentence), damages for grid connection delays can also be claimed by wind farms for which currently grid connection delays are anticipated.

b. Damages Reallocation Scheme

If the damages payable by the TSO under the new provisions are due to negligence, they can be passed on to the other TSOs (and ultimately the consumers) in a staggered manner described below, except for the following deductibles, which have to be borne by the respective TSO (new Section 17f para. 2 EnWG):

  • 20% of the damages up to EUR 200 million per calendar year (i.e. up to EUR 40 million),
  • 15% for damages exceeding EUR 200 million up to EUR 400 million per calendar year (i.e. up to another EUR 30 million),
  • 10% for damages exceeding 400 million up to EUR 600 million per calendar year (i.e. up to a further EUR 20 million);
  • 5% for damages exceeding EUR 600 million up to EUR 1,000 million per calendar year. Here parliament tightened the bill as adopted by the government, which contained an upper limit of EUR 800 million (i.e. up to a final EUR 20 million).

The maximum total here adds up to EUR 110 million. Damages exceeding EUR 1,000 million per calendar year can be passed on completely in case of negligence.

In case of damages caused by negligence (not by gross negligence), Section 17f para. 3 limits the deductible for the TSO to EUR 17.5 million per event causing damages. In case of a grid connection delay or a power disruption it is (rebuttably)  presumed that the TSO acted with gross negligence.

c. Reallocation Limits

So as not to burden consumers unduly, Section 17f para. 5 EnWG mandates that grid charges for end consumers may only rise by 0.25 ct/kWh for a consumption up to 1 million kWh and by 0.05 ct/kWh for a consumption exceeding that threshold. For final consumers of the manufacturing industry whose electricity costs amount to 4% of the turnover in the previous calendar year the aforementioned limits are halved.  However, the cap for consumers is only a cap in any individual year. An exceeding amount that what unrecoverable due to the annual cap can be moved to the following year, with interest.

The new Section 17g limits the liability of the TSO responsible for grid connection for material damage to offshore installations, which were not caused due to intentional misconduct, to EUR 100 million for each incident.

2. Federal Offshore Planning, Offshore Grid Development Plan by TSOs, Right to Grid Connection

To better coordinate offshore grid expansion, the Federal Agency for Maritime Shipping and Hydrography (BSH) becomes responsible for Federal Offshore Planning (Bundesfachplan Offshore – new Section 17a EnWG). To this end BSH has to draw up an annual offshore grid plan in cooperation with BNetzA, the Federal Environment Agency and the Coastal states. The plan contains specifications concerning offshore wind farms, power line routes, converter stations etc.

The new Section 17b EnWG requires the TSOs to present BNetzA an annual offshore grid development plan by 3 March of each year, starting 3 March 2013 together with the national grid development plan pursuant to Section 12b for approval. The offshore grid development plan has to be based on the offshore grid plan by BSH. It has to contain all the measures and steps for an optimization, enhancement and expansion of the offshore grids, which have to meet the demand and ensure the security of supply over the next ten years and are necessary for a safe and reliable operation of the offshore grid connections.

The individual right to grid connection under the currently applicable EnWG will be replaced by the right to a non-discriminatory allocation of capacity as of the date of completion of a grid connection (Section 17d para. 3 EnWG new). A grandfathering rule regarding the currently applicable individual right to grid connection applies (new Section 118 para. 12 EnWG). The TSO responsible for grid connection has to inform about the expected date of completion of a grid connection. 30 months before the anticipated completion the announced date of completion becomes binding (Section 17d para. 2 sent. 5). This is important for the above described new liability regime.

II. Postponement of Planned Shutdown of Power Plants to Improve Security of Supply

The new Section 13a para. 1 stipulates that operators of plants generating or storing electricity with a rated power of 10 MW or more are required to inform the responsible transmission operator and BNetzA at least twelve months prior to a preliminary or permanent closure of power plants or parts thereof. Preliminary or permanent shutdowns without notification or prior to the end of the twelve month period are prohibited.

According to Section 13a para. 2 permanent closure of  plants generating or storing electricity with a rated output of 50 MW or more are also prohibited after the expiry of the period set out in Section 13a para. 1 EnWG if

  • the responsible TSO declares the plant “system-relevant”;
  • BNetzA approved this assessment;
  • and it is technically and legally possible to continue operations.

A plant is deemed “system-relevant” if it is sufficiently likely that a permanent closure would lead to a substantial danger for or a interference with the safety or reliability of the electricity supply system and cannot be overcome by other suitable measures.

Section 13a para. 3 EnWG provides that an adequate remuneration has to be paid if a plant is not allowed to be closed down. Section 13b EnWG gives the government the power to enact ordinances concerning various topics related to the postponement of shutdowns, including an ordinance that regulates the remuneration. According to the reasons provides for the bill, the plant operator shall be placed in a position as if the he would not be required to further operate the plant. Hence, the remuneration shall not include opportunity costs.

Section 13c para. 1 EnWG contains a similar provision for gas-fired power plants with a rated capacity of 50 MW or more. If a plant is required to continue operations, the operator is even required to ensure the output of the plant by using the possibility to switch the fuel used if technically and legally possible and economically reasonable. In that case they are entitled to claim a compensation for additional costs incurred.

The new provisions were introduced as the winter 2011/2012 was charcterised by an increased number of critical situations in the German power grids following the shutdown of eight nuclear power plants in 2011 in the wake of the nuclear accident in Fukushima, Japan, and the subsequent Germany energy policy shift. Besides, building new conventional power plants that could balance the growing amount of renewable energy fed into the German grids has become increasingly unattractive as renewable power enjoys priority with regard to the connection, purchase and transmission under the Renewable Energy Sources Act (EEG).

III. Exemption of Pumped Storage Power Plant from Grid Charges

The EnWG amendment relaxes the requirements laid down in Section 118 para. 6 EnWG for an exemption of pumped storage power plants from the grid charges.

According to the revised provision, existing pumped storage power plants can be exempted from the grid charges when they either increase pump or turbine capacity by 7.5% (previously 15% were required) or the energy amout that the plant can storage by 5% (previously both requirements had to be fulfilled simultaneously).

IV. Interruptible Loads

Provisions regarding interruptible electricity loads are the revised Section 13 para. 4a EnWG and the new Sections 13 para. 4b and 14b EnWG.

Sections 13 para. 4a and 4b EnWG mandates that if it is economically and technically reasonable the procurement of interruptible loads by the transmission system operators has to take place by tender in a non-discriminatory and transparent way.

The new Section 14b EnWG  allows operators of gas distribution grids to charge end consumers connected to their grids who contractually agreed to an interruptible supply reduced grid fees insofar as the agreement helps to avoid grid bottlenecks. For operators of electricity grids Section 14a EnWG already contains a provision allowing for reduced grid charges for interruptible consumer facilities that help stabilise the grid.

Source: Bundestag

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