Series of Articles: Energy Sharing – Regulatory developments and prospects for diverse business models in Germany

Energy sharing refers to the coordinated use and generation of electricity, independent of established market roles, including the inclusion of the public grid. Energy sharing can intrinsically combine several positive repercussions. Among other things, it can enable greater participation of private individuals in the energy transition, thereby increasing acceptance of renewable energies and private investment. Energy sharing is also expected to create incentives for the grid-friendly use of flexible consumption equipment at local level.

In November 2024, a legislative proposal was made to amend the Energy Industry Act (EnWG) to enable energy sharing using the public grid. This raises various questions regarding implementation, pricing and possible system repercussions. In this article series, we provide an insight into current developments and explain possible forms of design and the implications for the energy system.

The European Union has defined obligations for member states to implement a framework for energy sharing in national law [3, 4]. In Germany, several regulatory changes were made in 2024 to implement the EU directives. 

With Solar Package I [5], the tenant electricity and shared building supply models were introduced in spring 2024, which allow energy sharing without using the public grid. In November 2024, a draft law [6] was proposed to amend the Energy Industry Act (EnWG). In particular, this contains the new § 42c “Shared use of electrical energy from plants for the generation of electricity from renewable energies”, which is expected to come into force on June 1, 2026 and will allow energy sharing using the public grid. 

The implementation of energy sharing will not only create opportunities for private players, but also new business models for established market participants, for example as an organizer of process-related implementation and/or as a supplier of residual electricity. The draft law on §  42c EnWG leaves plenty of room to maneuver to develop innovative business models in the field of energy sharing. 

The aim of this article is to provide a detailed insight into the implementation of energy sharing in accordance with § 42c and an overview of possible business models. 

Draft Law § 42c EnWG 

Who may participate?

The draft law provides for plant operators to share the electricity generated with other (‘co-using’) end consumers.  

Plant operators are natural persons, legal entities under public law, small and medium-sized enterprises (SMEs) whose main activity is outside the energy sector, as well as companies and cooperatives of end consumers outside the energy sector. Co-utilizing end consumers may be all end consumers pursuant to § 3, No. 64 of the amended EnWG, i.e. ‘natural or legal persons who purchase energy for their own consumption […]’, with the exception of large companies. 

Use of the public network and geographical boundaries

Supply should be allowed to take place using the public grid. Contracts for the joint use of electricity may be concluded between system operators and end consumers located in the same balancing area. From 1 June 2028, contracts between players in directly adjacent balancing areas will also be permitted. 

Actors involved and responsibility for energy industry processes

In principle, the supply of electricity in Germany is associated with numerous obligations. System operators who supply electricity within the scope of § 42c EnWG are exempt from some of the supplier obligations if the system operated does not exceed an output of 30 kW (100 kW for jointly operated systems in multi-party buildings).  

In detail, the notification obligation (§ 5 EnWG), the guidelines for electricity invoicing (§ 40 EnWG), the electricity labelling obligation (§ 42 EnWG) and the basic supply obligation (§ 36 EnWG) are no longer applicable, regardless of the size of the system. Consumers can therefore conclude an additional contract with an energy supplier of their choice to cover their basic supply.  

However, obligations under § 20 EnWG regarding access to electricity distribution grids – in particular the balancing of shared electricity volumes – are the responsibility of the system operators in the current draft bill. They may commission third parties to handle these processes. In addition, third parties may also be commissioned to provide services in connection with the conclusion of contracts, billing, the operation of installations or the provision of flexibility services (e.g. virtual power plant). 

The involvement of third parties is a direct implementation of the EU directives, which introduce the term ‘organiser of joint energy use’ for this purpose. 

Measurement concept

The current draft bill requires recording load profile measurement (RLM) of the electricity generated and consumed at 15-minute intervals, although the explanatory memorandum to the draft bill also mentions intelligent metering systems (smart meter gateway plus modern metering equipment) as a possible solution. 

The decisive factor is that simultaneous generation and consumption must be proven (with 15-minute granularity). Energy sharing is clearly different from existing balanced electricity products. 

Allocation key and pricing

The contract between the system operator and the consumer must contain a distribution formula that sets out the rules governing the consumer’s entitlement to the electricity generated. Two options are applicable here: 

• With a static allocation key, the consumer is allocated a share of the electricity generated at any point in time. 

• With a dynamic allocation key, the electricity is allocated to all consumers who have concluded a contract with the system operator at any time in proportion to their current consumption. 

The price for the shared electricity is negotiated bilaterally between the system operator and the consumer. Its amount must be contractually agreed and is static for the duration of the contract. 

Funding

The draft law does not provide for any subsidization of the shared use of electricity. In contrast to shared building supply or direct self-consumption behind the grid connection point by system operators, all taxes, levies and charges are incurred. 

However, the system operator retains the right to the market premium (§ 20 EEG) when directly marketing his surplus quantities (i.e. after parts of the electricity) in accordance with § 21b of the Renewable Energy Sources Act (EEG). This reduces the risk for system operators when participating in the joint utilization of electrical energy. However, the entitlement to the feed-in tariff in accordance with § 21 EEG no longer applies. 

Potential business models 

As part of the implementation of energy sharing in accordance with § 42c, numerous new business models are emerging that offer potential for energy suppliers and energy service providers in particular. We present these business models, summed up in Figure 1, below. 

Role as residual electricity supplier

The draft bill under § 42c EnWG stipulates that consumers need a residual electricity contract in addition to their contract with a system operator. It is explicitly permitted for the residual electricity supplier to price this electricity differently from normal household tariffs. 

The following questions need to be answered in order to develop this new business segment: 

• What pricing strategy makes it possible to be competitive and at the same time secure an attractive margin? 

• In principle, residual electricity tariffs can be both static and dynamic tariffs. What are the advantages and disadvantages of both solutions for consumers and energy suppliers? The distribution of the price risk between energy suppliers and consumers, for example, is a key issue here. 

• The procurement and balancing of residual electricity volumes will require its own forecasts, as residual electricity consumption is dependent on local generation and local consumption and cannot be forecast using standard load profiles. How can such forecasts be organized? 

Role as organizer of shared energy use

It is to be expected that system operators and consumers will seek support from third parties in the procedural implementation of energy sharing. The role as organizer of energy sharing and the associated business models are diverse. Possible services for the organization of energy sharing are presented below. 

Platform to match producers and consumers: 

The success of energy sharing in accordance with § 42c EnWG depends heavily on consumers finding suitable system operators whose local generation covers their consumption well. A platform that automates the matching of producers and consumers based on their load profiles would provide significant added value for all participants. 

Legal assistance in concluding contracts between system operators and consumers:  

In particular, model contracts or automated contract creation could provide considerable added value here. 

The company also develops supplier obligations on behalf of the system operators: 

As plant operators are not exempt from all supplier obligations, it is to be expected that there will be a great demand for services in this area. The following processes, among others, must be mapped: 

• Balancing group responsibility for the shared energy quantities 

• Billing of the shared energy volumes (including responsibility for the payment of grid fees, taxes, levies and surcharges) 

• Optional: direct marketing of surplus electricity 

The increased complexity of balancing and billing shared energy volumes also opens up new opportunities for innovative solutions and products, such as virtual balancing groups. 

Distribution of storage, energy management and aggregation solutions

In order to exploit the full potential of energy sharing, consumers can commission an energy management solution provider to manage their flexible consumers to maximize the consumption of local electricity. In addition, the provider can also act as an aggregator and market the flexibility in various other ways, for example for system services. 

Investment in storage solutions can also be incentivized through participation in energy sharing contracts. It is to be expected that participation in energy sharing will be associated with a strong interest in storage, energy management and aggregation solutions, which will create interesting business opportunities. A targeted sales strategy that addresses the needs of energy sharing participants should be developed.  

Prospects for energy cooperatives and citizen energy companies

Energy cooperatives and community energy companies are explicitly allowed to supply electricity to their members in the new draft law. This implementation of collective self-consumption in German law offers exciting development prospects for the more than 1,000 German energy cooperatives [7].  

The direct consumption of electricity can be more economical for members of the cooperative than its commercialization. However, as the procedural implementation of joint self-consumption is associated with new responsibilities, this further development must be carefully planned in advance. 

Conclusion and role of the FfE 

To summarize, the implementation of energy sharing in German law offers the potential for innovative business models for electricity suppliers or energy service providers, as well as further development prospects for energy cooperatives. 

The business models are also particularly interesting in combination. For example, overall solutions consisting of residual electricity contracts and HEMS solutions and flexibility marketing can be particularly attractive for consumers. 

FfE has been following regulatory and technological developments in the field of energy sharing for many years (for example in the projects InDEED and PEAK) and can draw on a wealth of experience in the development of innovative business models. 

With this overall view, we are in the perfect position to support the development of specific business models in the field of energy sharing in the coming years. We offer consulting services to develop personalized business models and development roadmaps for each company based on its existing portfolio and expertise. 

Literature:

[1] Wiesenthal, J., Aretz, A., Ouanes, N., & Petrick, K. (2022, Mai). Energy Sharing: Eine Potenzialanalyse. Gemeinschaftlich Strom im Verteilnetz erzeugen und nutzen: Eine Studie  zum Umsetzungsvorschlag im Rahmen von Artikel 22 der Erneuerbare-Energien-Richtlinie der EU. Institut für ökologische Wirtschaftsforschung (IÖW). https://www.ioew.de/fileadmin/user_upload/BILDER_und_Downloaddateien/Publikationen/2022/Energy_Sharing_Eine_Potenzialanalyse_1.pdf

[2] Ritter, D., Bauknecht, D., Fietze, D., Klug, K., & Kahles, M. (2023). Energy Sharing: Bestandsaufnahme und Struktu-rierung der deutschen Debatte unter Berücksichtigung des EU-Rechts. Umweltbundesamt. https://www.umweltbundesamt.de/publikationen/energy-sharing

[3] Richtlinie (EU) 2019/944 des Europäischen Parlaments und des Rates vom 5. Juni 2019 mit gemeinsamen Vorschriften für den Elektrizitätsbinnenmarkt (EMD III) EUR-Lex – 02019L0944-20240716 – EN – EUR-Lex

[4] Richtlinie (EU) 2018/2001 des Europäischen Parlaments und des Rates vom 11. Dezember 2018 zur Förderung der Nutzung von Energie aus erneuerbaren Quellen (RED II) Richtlinie – 2018/2001 – EN – EUR-Lex

[5] Bundesregierung – Mehr Photovoltaik mit Solarpaket | Bundesregierung

[6] BMWK – BMWK – Bundeskabinett beschließt Vorhaben im Energiebereich und für innovationsfreundliche Rahmenbedingungen

[7] DGRV-  Deutscher Genossenschafts- und Raiffeisenverband e.V. – Survey_Energy_Cooperatives_2024