In its decision of 20 December 2023 (VI-3 Kart 183/23), Düsseldorf Higher Regional Court ruled that electricity grid operators are not permitted to levy a construction cost contribution under the capacity price model for connecting net-bound battery storage systems to the grid. Although this ruling could significantly reduce the investment costs of project developers and operators of battery storage systems, it has also created legal uncertainty as to whether and how construction cost contributions will be determined in future for battery storage systems.
The complainant had asked the competent grid operator to connect a net-bound battery storage system to the electricity grid. Such a system stores electricity from the grid and releases it back into the grid when needed. It does not use the electricity itself. The operator of the battery storage system initially complained to the Federal Network Agency (Bundesnetzagentur) about the construction cost contribution demanded by the grid operator to connect the system to the grid, but without success (decision of 6 December 2022 – BK6-22-242). The appeal against the Bundesnetzagentur’s decision has now been partially successful at the Düsseldorf Higher Regional Court.
Construction cost subsidies
Section 17(1) Energy Industry Act (Energiewirtschaftsgesetz, “EnWG”) forms the basis for construction cost contributions above the low-voltage level and stipulates that systems must be connected to the grid on fair and reasonable terms. The aim of the construction cost contribution is to prevent grid customers from overestimating their connection needs. The grid connection should correspond to the connection capacity actually used, in order to avoid unnecessary grid expansion. Primarily, therefore, the construction cost contribution functions as a means of guidance and control. Only grid customers on the “exit side”, i.e. consumers, are obliged to pay construction cost contributions, while no subsidy is levied for power generation plants feeding into the grid. What sets net-bound battery storage systems apart is that they operate on both the “exit” and “entry” sides, as they not only draw electricity from the grid, but also feed it back into the grid when necessary.
The amount of the construction cost contributions is usually calculated according to the capacity price model proposed by the Bundesnetzagentur in a 2009 position paper. This involves multiplying the capacity supplied by the published capacity price. In the case of large storage facilities, this calculation method means that the construction cost contribution can account for a considerable part of the investment costs.
Düsseldorf Higher Regional Court’s decision
In its decision from December 2023, Düsseldorf Higher Regional Court found that levying construction cost contributions for net-bound battery storage systems was permissible in principle, but that the special nature of these systems had to be taken into account when calculating the contributions. It stated that the continued application of the capacity price model as before would be discriminatory and therefore unlawful.
The Court ruled that, contrary to a widely held view in the legal literature, the levying of construction cost contributions was also permissible in principle for net-bound battery storage systems. Specifically, such contributions did not run counter to section 118(6), sentence 1 EnWG, which exempted storage facilities from paying grid access fees for a specified period. The Court took the view that the construction cost contribution was not a grid fee within the meaning of this provision. Furthermore, although it followed from both EU law and section 118(6) EnWG that storage facilities play an important role in connection with renewable energy expansion, this did not generally preclude the levying of contributions.
However, the Court did state that calculating the construction cost contribution without making changes to the capacity price model was discriminatory within the meaning of section 17(1), sentence 1 EnWG and abusive within the meaning of section 31(1) EnWG. In this case, the discrimination arose from treating substantially different situations equally without objective justification. The operator of a net-bound battery storage system differed significantly from an end consumer. Unlike an end consumer, a net-bound storage facility could not continuously draw its connected capacity from the grid. The Court pointed out that once the storage facility was fully charged, it could not draw any more electricity, but had to first feed it back into the grid.
Finally, the Court also stated that the construction cost contribution did not function as a means of guidance and control in the same way for net-bound storage facilities as it did for normal end consumers. Instead, its primary effect was to influence site selection, as storage facilities tended to be located in areas where they had to pay the lowest construction cost contribution. Battery storage systems did not affect the size of the grid in the same way as typical grid customers on the “exit side” as they could also be operated in a manner benefitting the grid.
Outlook
In its judgment, Düsseldorf Higher Regional Court did not specify how the construction cost contribution should be levied for net-bound battery storage systems, but rather entrusted this task to the Bundesnetzagentur. Furthermore, the judgment is not yet final and binding, as the Bundesnetzagentur has lodged an appeal against the Higher Regional Court’s decision with the Federal Court of Justice.
This means that the battery storage industry’s partial victory at the Düsseldorf Higher Regional Court is currently clouded by significant legal uncertainty. It is unclear whether and, if so, how the construction cost contribution will be calculated in future for net-bound battery storage systems. Contributions paid before the Federal Court of Justice’s decision might then have to be reversed. In addition, construction cost contributions should only be paid subject to the proviso that they may need to be reimbursed at a later date.
Forward