BDEW Distribution Networks Study

On Tuesday the Federal Association of the Electricity and Water Industry (BDEW) presented a study on the need for the expansion of the German distribution networks and the costs thereof in view of the integration of the expected new PV and wind power capacity until 2020.

“The debate about the necessary extension of the grid to integrate renewable energy has to be extended to the distribution networks. It is not enough to look at transmission networks only. With the strong increase of photovoltaic installations, more and more electricity is fed directly into distribution networks”, Roger Kohlmann, member of the managing board of BDEW said.

Investments were calculated on the basis of forecasts by the government for new PV and wind power installations until 2020.

However, a definitive cost estimate could not be made as the government used two different sets of figures, BDEW said. One the one hand, the government’s Energy Concept calculated with an installed capacity of 33.3 GW in 2020. If one took this estimate as a basis, some 195,000 km of power lines in the distribution network had to be built at a cost of up to EUR 13 billion.

In its 2010 reference scenario (BMU-Leitszenario), the Federal Environment Ministry, however, expected additional wind power and PV capacity of 51.8 GW. Based on this estimate, some 380,000 km of new distribution network power lines were needed, resulting in costs of up to EUR 27 billion.

At any rate the BDEW study showed a massive need for investments, Mr Kohlmann pointed out.

To attract capital for the nessary investments, a regulation allowing for adequate returns was essential, BDEW pointed out. Return on investments in transmission and distribution networks had to match at least those of alternative investments or capital market investments. In view of the urgent need to modernise and expand the German grid, they should actually be more attractive, Mr Kohlmann said. He predicted that regulation systems would vie for the most efficient regulation.

BDEW suggests that the Federal Network Agency, the German grid regulator, considers returns in comparable markets when deciding on equity returns. Venture surcharges (Wagniszuschlag) for investments in energy networks amounted to 3.6% in Germany, thus being lower than all other venture surcharges in the European Union with the exception of Denmark.

In November 2010 the German Energy Agency dena presented its dena Grid Study II. In its base scenario, dena saw a need for 3,600 km of new extra high voltage lines until 2020/2025. Dena believed the resulting costs to amout to roughly EUR 9.7 billion. Alternative scenarios would cost up to EUR 29 billion, the agency said.

Today dena and BDI welcomed the key points for a Grid Expansion Acceleration Act (NABEG) presented by Economics and Technology Minister Minister Rainer Brüderle on Tuesday. Both institutions said there was the need for additional measures concerning the distribution networks, due to the fact renewable energy installations were often connected to and fed into these networks, resulting in a need for massive investments.

Source: BDEW, dena