Planning approval must continue to apply unbundling regulations

The German Bundestag passed on Thursday, April 5, 2019 in second and third reading the Law for the Acceleration of the Extension of Electricity Grids (NABEG). Specifically, under the Energy Industry Act (EnWG), Section 43 (2) the competent federal authority is granted the right to permit, upon request of a project sponsor, the following:

No. 7: The construction and operation as well as the modification of energy coupling systems and
No. 8: the construction and operation as well as the modification of large storage facilities with a nominal capacity of 50 megawatt and above, insofar as they are not subject to § 126 of the Federal Mining Act.

The Initiative Erdgasspeicher e.V. (INES) welcomes the fact that, with the adoption of NABEG, the legislator has taken concrete measures with the aim of simplifying planning approval procedures and clearly assigning competencies. With regard to the application of the created regulations, INES trusts that the competent federal authorities continue to comply with the unbundling provisions, in particular in the approval of Power-to-Gas or storage projects. In addition, INES assumes that investments in Power-to-Gas facilities or storage will continue to take place in a market economy environment and therefore will not be recognized by the Federal Network Agency (BNetzA) or state regulatory authorities as part of the imputed assets of a grid operator.

In the energy industry irritations had been triggered specifically by the opinion of the Federal Council. An amendment of § 43 EnWG was justified by the opinion as follows:

"There is a continuing need for approval in the sense of § 43 sentence 1 EnWG for energy coupling systems and large storage. As a clarification option, a catalog extension in § 43 sentence 1 EnWG for the timely creation of a clear basis for an approval as a main system for grid coupling is advocated. In view of the Power-to-Gas projects for the coupling of different electricity grids of several consortia of transmission system operators in the gas as well as the electricity sector, which are presumed in the scenario framework of network development planning, appropriate legal approval requirements have to be created for the realization of these installations. So far it is unclear whether these facilities count as ancillary facilities to a power line or a gas pipeline under § 43 sentence 3 EnWG and which of the two infrastructures they would be assigned to. The catalog extension is also appropriate in view of the foreseeable lack of an operator identity of the consortia or, where applicable, third parties vis-à-vis the operation of a transmission network or a pipeline network." (German Federal Council Opinion on NABEG, p. 4, translated by INES)

A grid operator's investment in Power-to-Gas or regulatory storage is neither compatible with the unbundling requirements of the Third Internal Market Package, nor is it helping to boost the market for Power-to-Gas or the flexibility market as a whole.

Power-to-Gas systems are versatile. They will produce energy that is needed to technically achieve the climate goals in industry and transport. They will also produce energy that can be used to decarbonise the heating market at economically optimized costs. Combined with gas storage, they provide the necessary medium and long-term storage options for a successful energy transition. In addition, Power-to-Gas also enables improved coupling of the electricity and gas grids, thus opening up cost advantages.

"Looking at the versatile uses of Power-to-Gas, a market-based approach should be chosen that motivates the different actors to make full use of the synergy effects. The associated competition leads to product and process innovations and thus enables a cost degression of this important technology," explains Sebastian Bleschke, Chief Executive Officer of INES. "However, if Power-to-Gas plants are built and operated by grid operators in a regulated environment, there will be no market with a correspondingly positive impact on technological Progress."

Politicians can constructively support the market upturn in Power-to-Gas by rapidly removing the distortive effects of the levy and tariff system and by revising electricity and gas network charges in the context of coupling energy sectors.