21.01.2025

Use Instead of Curtail – An initial assessment of the trial phase of 13k EnWG

Initial situation

The expansion of renewable energies is booming. However, the annual costs for redispatch and feed-in management have increased tenfold in the ten years from 2013 to 2023 to over 2.6 billion. With a volume of over 10 GWh, the curtailment of renewables accounts for a significant share of these costs. Over 90 % of this curtailed energy can be attributed to onshore and offshore wind turbines. The newly introduced Section 13k EnWG aims to significantly reduce the curtailed. The idea is to sell this electricity to controllable loads at a discount instead: “Use instead of curtail”

Concept

Based on historical curtailment volumes, the TSOs have therefore designated so-called relief regions for the windy north of Germany. Only loads in these regions are eligible to participate in “Use instead of curtail”. Every day at 10:00 a.m., the TSOs publish the available curtailment electricity volumes in the relief regions for the following day on netztransparenz.de. Allocation to eligible loads is initially carried out in the trial phase using a simplified flat-rate procedure (i.e. no competitive tendering). In the event of oversubscription, electricity volumes are allocated to eligible loads on a percentage basis. The awarded loads then procure these energy volumes independently on the day-ahead market and not from the TSOs.

However, in very few cases do loads have to pay the full wholesale price. The actual price reference is a standardized 13k price. If the day-ahead price at which the load has bought in is higher, the price difference is reimbursed by the TSO. The 13k price is based on the costs of fossil heat generation and, considering the current gas and CO2 price, is around 40 €/MWh. The price reference was chosen because, for example, PtH plants are in competition with gas boilers (more on this in the additionality criteria section). Usually, in addition to the pure exchange electricity price for loads, ancillary electricity costs such as taxes, levies, surcharges and grid fees apply. Thus, the concept also provides for a compensation mechanism here. However, the sum of the reimbursement of the difference to the 13k price and the compensation may not exceed the costs for an alternative redispatch measure.

Figure 1: Conditions for calculating the reimbursement and the maximum compensation

Additionality Criteria

However, not all contrallable loads in the designated load shedding regions benefit from these discounted electricity volumes. In general, only installations from the following segments can register for the instrument:

  • Segment 1 – Substitution of fossil heat generation
    This segment includes installations that can replace fossil heat generation during operation. This assumes that fossil and electricity-based heat generation are designed redundantly. Examples of this could be heating rods in district heating networks and industrial processes or hybrid heat pumps.
  • Segment 2 – Grid-connected electricity storage systems
  • Segment 3 – Electrolysers and large heat pumps > 100 kW connected load

The BNetzA has also issued strict additionality criteria in order to prevent windfall profits. For example, systems from segments 1 and 2 must demonstrate consumption in the previous month that corresponds to a maximum of 2% full load hours. Exceptions are only granted for the purchase of 13k electricity quantities, the provision of balancing energy and frequency containment reserve as well as test runs on the instructions of the grid operators. This means significant losses for industrial scale battery storage systems, which are mainly refinanced through arbitrage trading, as they would be de facto blocked from regular trading on the electricity exchanges if they were to participate in 13k.

This previous month criterion does not apply to large heat pumps and electrolysers. Instead of operational additionality, they can also demonstrate investment additionality. All they have to do is go into operation after 29.12.2023.

Debate

The storage industry in particular has criticized these strict additionality criteria. In the opinion of many, this represents a missed opportunity to use storage facilities in the designated curtailment regions in the windy north to absorb surpluses of renewable energy. A look at the electricity volumes that have been designated and actually added since the start of the trial phase in October 2024 seems to prove the critics right: The instrument has not yet been used despite the existing supply.

Figure 2: Published and allocated curtailment volume; source: www.netztransparenz.de

The BNetzA opposes this and argues that a softening of the criteria would ultimately amount to a bidding zone split, as loads in the relief regions would benefit from these favorable energy volumes across the board, while loads in the south would still have to purchase at the regular wholesale prices. Likewise, lax regulations would promote windfall profits and false incentives for congestion-enhancing behavior (in particular inc-dec gaming).

The BNetzA must therefore achieve the following balancing act: The criteria should be as soft as possible to incentivize sufficient participation, but on the other hand they must limit electricity consumption to a genuine additional amount. We are curious to see what the two-year trial phase will bring and whether we will soon see a completely different picture when we look at the allocated electricity volumes.