Bundesnetzagentur position paper on construction cost contributions

On 20 November 2024, the Federal Network Agency (Bundenetzagentur) published a new position paper on charging construction cost contributions for electricity grid connections, thereby updating its position from 2009. However, apart from the possibility of differentiating construction cost contributions based on impact, which is limited to transmission system operators, the Bundesnetzagentur’s previous position has remained largely unchanged. This outcome is likely to disappoint battery storage operators, who had hoped for reductions in contributions following the decision of Düsseldorf Higher Regional Court (20 December 2023 (VI-3 Kart 183/23) Link). It remains to be seen how the Federal Court of Justice will decide in this regard. 

Background

On 20 November 2024, the Bundesnetzagentur published a new position paper on charging “construction cost contributions” (Baukostenzuschüsse). These are one-off payments required from a connection user to cover a proportional share of grid expansion costs necessary for its (new or extended) grid connection. The contributions have a guidance and control function and send a price signal to promote responsible and efficient management of connection capacities. Construction cost contributions are determined and charged by the respective network operator. The network operators have considerable discretion when it comes to implementation since, outside the low-voltage level (section 11 Low Voltage Connection Ordinance (Niederspannungsanschlussverordnung), section 17(1) Energy Industry Act (Energiewirtschaftsgesetz, “EnWG”) only provides a very general legal basis for charging construction cost contributions; it merely lays down the general conditions of the grid connection but does not expressly refer to the charging of construction cost contributions.

Building on its initial position paper from 2009, the new paper shows the Bundesnetzagentur’s current legal opinion on key application issues relating to construction cost contributions. Although not legally binding, the paper provides guidance for affected market participants.

How construction cost contributions are used

Construction cost contributions are generally incurred for all grid connections; the only exceptions are in the case of grid connections for systems that are used exclusively for feeding into the grid. Just like it did in the 2009 position paper, the Bundesnetzagentur considers the network operator entitled to charge construction cost contributions not only for new connections, but also for (i) the relocation of the grid connection at the instigation of the connection user, (ii) a change in the connection grid level at the instigation of the connection user and (iii) a capacity increase by the connection user (irrespective of any previous reductions in connection capacity).

What is new, however, is that the Bundesnetzagentur for the first time takes the view that charging construction cost contributions also fulfils a financing function, albeit it subordinate to the guidance and control function. This gives rise to a de facto obligation for all network operators to charge construction cost contributions in order to avoid being accused of inefficient management later on.

Modification of the capacity price model

The Bundesnetzagentur continues to advocate for a construction cost contribution calculation for grid connections to the transmission and distribution network based on the “capacity price model”. This means that the construction cost contributions are determined by multiplying the contractually agreed supply of capacity by the capacity price applicable at the time the contract is concluded.

Yet, given the recent strong fluctuations in the capacity price, the Bundesnetzagentur is now planning to modify this formula. In future, the arithmetic mean of the capacity price of the last five years is to be used instead of the capacity price at the time the contract is concluded. This change aims to protect connection users from financial exploitation due to external intervention (e.g. federal subsidy, renewable energy grid cost shifting, etc.) and to make it easier to compare capacity prices over time.

In general, the Bundesnetzagentur also makes it explicitly clear that it does not regard alternative calculation methods such as a VDN model (VDN = Verband der Netzbetreiber (association of network operators)) as inherently unsuitable for meeting the statutory adequacy and transparency requirements (sections 17(1), 21(1) EnWG).

Discretion for transmission system operators (TSOs) when charging construction cost contributions

The Bundesnetzagentur continues to emphasise the principle of non-discrimination – which is also stipulated in sections 17(1), 21(1) EnWG – when construction cost contributions are levied. According to this principle, all network operators within a grid area are to pay a uniform construction cost contribution for connections of equal quality.

The Bundesnetzagentur has recently approved an exception to this principle at the transmission system level: TSOs should apply a scale for contributions, divided into five equal levels ranging from 100% to 20% of the capacity price (“impact-based differentiation”). This will be based on the amount of the additional costs for grid expansion or adjustments in congestion management incurred with the new connection.

These costs in turn mainly depend on the geographic location of the desired connection, especially on the level of connection capacities already in place there. This approach is intended to incentivise connection users – in line with the guidance function of the construction cost contributions (see above) – to make efficient and economical use of existing connection capacities. A prerequisite for allowing differentiation is that the TSOs must agree on a uniform procedure based on a transparent calculation method and that the construction cost contribution is under no circumstances set at less than 20% of the capacity price.

The Bundesnetzagentur expressly rejects a similar exception to the principle of non-discrimination for distribution system operators. This is likely due to the fact that the advantages/disadvantages associated with the geographic location of a grid connection generally do not differ significantly in distribution networks.

No privileged treatment for battery storage systems

The Bundesnetzagentur is less innovative when it comes to levying construction cost contributions on battery storage operators. It maintains that, since connected battery storage systems would, like all other connection users, in any case require the provision of network capacity on the exit side, they are – from the grid operator’s point of view – to be treated like other consumers, which also includes the customary payment of construction cost contributions.

Düsseldorf Higher Regional Court recently examined the legal permissibility of this classification (20 December 2023 (VI-3 Kart 183/23), (article of 15 April 2024), and ultimately held that determining construction cost contributions in a undifferentiated manner using a capacity price model was not permissible – at least not for grid-connected battery storage systems. The related appeal is currently pending before the Federal Court of Justice (EnVR 1/24). It is therefore conceivable that the Bundesnetzagentur will have to revise its statements on battery storage systems in the coming months. For this reason, its rigid position can certainly be viewed critically.

To strike a balance between this uncertainty on the one hand and the new obligation to levy construction cost contributions (see above) on the other, network operators and connection users in the battery storage sector are advised to only levy/pay construction cost contributions on the understanding that these may need to be refunded depending on the outcome of the proceedings before the Federal Court of Justice.

Conclusion

The Bundesnetzagentur’s position paper introduces significant changes and clarifications regarding the levying of construction cost contributions. Notably, the capacity price model has been modified to calculate contributions based on the arithmetic mean of the last five years. The paper also emphasises the importance of levying construction cost contributions in a non-discriminatory manner, requiring TSOs to differentiate between capacity price levels. While the paper did not result in the desired reduction in the construction cost contributions for the connection of battery storage systems, it remains to be seen how the Federal Court of Justice will decide.