Incentive mechanisms to relieve the electricity grid – Classification of the concepts from unIT-e²

The transition of the energy system is accompanied by a fundamental change, away from centralized, fossil-based supply structures towards a decentralized, renewable system. To leverage the flexibility potential of these decentralized systems and integrate them safely and efficiently into the energy system, a restructuring of the energy industry is required in addition to technical solutions. In this article, we discuss different incentive mechanisms and tools that are aimed in particular at the grid-friendly behavior of decentralized systems and can support this paradigm shift.

Regulatory framework for grid-friendly behavior

The legal framework, consisting of higher-ranking EU law, national legislation, regulations and specifications, plays a decisive role in the further development of grid-supporting flexibility provision. It often sets out objectives and provides scope for action. Currently, the German grid fee system primarily aims to allocate the grid costs to the users in a way that is as equitable and distributive as possible (i.e. “fair” or socially acceptable). Whether this is still the case in view of the rapidly changing generation and consumption landscape with prosumers is the subject of intense debate.

Additionally, a look at our European neighbors shows that grid fees provide an incentive for efficient grid utilization and can be used as an instrument for the efficient expansion of grid capacities. In Germany, however, these incentives have hardly existed to date, particularly at the low-voltage level. Here, consumers are normally divided according to a consistent energy price that is dependent on electricity consumption and a basic price that is independent of consumption. An exception to this is the time-variable grid fees available from April 2025 under § 14a EnWG. These are granted for steerable consumption facilities that participate in grid-oriented management to stabilize the grid.

The example of § 14a shows, on the one hand, how closely grid-oriented behavior and grid fees are interlinked and, on the other hand, how special grid fees for certain customer groups are used in Germany to solve certain grid-related challenges. In principle, EU law in Art. 32 of the EBM Directive and Art. 13 of the EBM Regulation requires the use of non-discriminatory market-based procedures for congestion management. Emergency mechanisms such as grid-based management therefore require justification and – on their own – do not satisfy the requirements of Union law in the long term. It therefore must be assumed that further steps towards market-based mechanisms will have to be taken in the medium to long term to meet the European target.

Incentive-based mechanisms for grid relief

The EU guidelines on congestion management and the fee system are interpreted and implemented differently in the individual member states. Generally, mechanisms of implicit, market-based coordinated and, in exceptional cases, direct control by the DSO can be derived from the legal framework. In the unIT-e² project, new incentive mechanisms for relieving grid congestion were designed based on international research. These are intended to be a targeted addition to the German approaches to congestion management at distribution grid level.The proposal of flat fees for connection users [1] in the low-voltage segment particularly addresses the criterion of fairness and is intended to ensure more efficient use of the available grid capacity.

However, the concept is not intended to respond to specific congestion situations. The “doubly optional dynamic network tariff” (dodyNT) [2] provides for network operators to offer a dynamic tariff as an alternative to the static tariff and for grid users to be able to voluntarily switch to and from this tariff (doubly optional). With the unIT-e² KOALA (coordination and allocation algorithm) [3], pricing for limited grid capacity is carried out via short-term capacity auctions, which places the mechanism within the coordinated control system. Both approaches – dodyNT and KOALA – aim to provide financial incentives to avert short-term congestion.

Outlook

In the future, there will continue to be a mix of different mechanisms for integrating household-related flexibility into the distribution grid safely and efficiently. In Germany, the Federal Network Agency has just recently expanded the mechanisms available to DSOs at low-voltage level with the introduction of § 14a EnWG. At the same time, the proposals from the unIT-e² project and a look at other European countries already offer indications of potential for further reform. This applies in particular to the further development of market-based mechanisms and fundamental questions regarding the setting of incentives through the grid fee structure, as mechanisms for congestion management are closely linked to the fundamental design of the grid fee system. We therefore derive the following open questions for an amendment of the grid fee system and further development of grid congestion management:

• Are flexible consumption facilities adequately involved in the grid costs, or are the costs in a dynamic tariff model mainly borne by inflexible consumers who cannot avoid high tariff times?
• How can dynamic price components be combined with peak-power-based grid charges – which should improve distributive justice – in a targeted manner?
• In a system with implicit flexibility incentives via price signals (such as dynamic or time-variable grid fees), are other market-based mechanisms in line with § 14c EnWG obsolete?
• Should emergency tools, such as direct control as per § 14a EnWG, be considered in grid planning in future in order to save effectively on grid expansion?
• How can suppliers, such as small PV systems, be integrated into congestion management in a more targeted manner? And should they also participate in the grid costs?

Literatur

[1] Benjamin Begander, Michael Tomaszuk, Marcus Helfer, Benedikt Görig (2024): Netzentgeltsystematik in der Niederspannung verursachungsgerecht gestalten – Fokus ab der 5. Regulierungsperiode Strom (ab 2029), Positionspapier_Netzentgelte.pdf

[2] Gerrit Gräßer, Fabian Mankat, Dorothea Koch, Georg von Wangenheim (2024): Der doppelt-optionale dynamische Netzentgelt-Tarif (dodyNT) – Ausgestaltungsvorschlag eines dynamischen Netzentgeltes zur Bewirtschaftung von Engpässen im Verteilnetz, dodyNT-E3.0.pdf

[3] Vincenz Regener, Simon Köppl, Tobias Klarmann, Johannes Hilpert (2024): Der unIT-e² KOALA – Ein anreizbasierter Mechanismus zur Koordination netzorientierter Steuerungsvorgänge, Der unIT-e² KOALA