Study on Incentives and Impediments for Grid Expansion by Bremen Energy Institute

In a new study commissioned by the transmission system operator Amprion, the Bremen Energy Institute (Bremer Energie Institut) analyzes incentives and impediments of the current regulatory framework for an expansion of the grid.

Due to the expansion of renewable energy generation, transmission system operators are faced with the need for large investments to expand and improve their grid. The current regulatory framework provides for an incentive regulation with a benchmark systems. The study examines whether the present system provides sufficient incentives for transmission system operators.

According to Bremer Energie Institut, compared with other countries, Germany lacks additional incentive programs that encourage investments. The study concludes that the current grid investment budget approach leads to a delay in refinancing expansion that creates a liquidity and profit gap. The study has four policy recommendations:

  1. Investment budgets on a target cost basis
  2. OPEX-CAPEX split and exclusion of CAPEX from benchmarking to reduce regulatory investment risk
  3. Adders for extension and restructuring investments
  4. Sliding scale mechanism for adjusting target/actual costs to better balance the trade-off between efficiency and investment incentives

The study should be seen against the federal governments recent Draft Energy Concept. As part of this concept, the government intends to examine whether the regulatory framework for grid expansion has to be amended. “Investments in modernization and grid expansion have to be financially attractive”, the energy concept expressly states.

Source: Presentation Bremer Energie Institut

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