When introducing the contents of the conference, Prof. Dr Christian Theobald pointed out that 25 years ago, almost to the day, the liberalisation of the German electricity market was initiated with the new Energy Industry Act (EnWG), which came into force at that time: “The fact that particularly the normative administrative regulatory framework, considered a successful model of effective market opening, has been condemned by the European Court of Justice (ECJ) as violating European law, is just historical irony”, says Theobald. The current legislative proposal on implementing the ECJ’s decision made the regulatory conference highly relevant.
After briefly reviewing the partly dramatic developments and events of the last months, such as gas shortages, the threat of a gas triage, supply chain problems, and high gas and electricity prices, Prof. Dr Ines Zenke presented some of the current and upcoming challenges. Price brakes, implementing expected industrial electricity prices and exploring the possibility of transforming methane gas networks into hydrogen networks are just a few of these challenges. Moreover, funding for challenged networks needs to be reconsidered. There is a lot to be done. “At least strong networks and infrastructure are perceived as Germany’s strengths,” says Zenke.
Although the 17th regulatory conference was not dedicated to a particular theme, Prof. Dr Christian Theobald addressed a topic that provided a central theme for the discussions and speeches. It was all about the ECJ decision of 2 September 2021, which, as Theobald states, clarifies one fact: “The Federal Network Agency’s (BNetzA) role will change.”
Dr Christian Schütte, chair of ruling chamber 9 of the Federal Network Agency, addressed exactly this issue in his presentation and emphasised that the far-reaching ECJ judgment represents a turning point for German energy regulation and that the Federal Network Agency is now given a range of competences that it had not wished for. One thing is clear: the German normative regulatory approach cannot be pursued any further. Schütte explained that the Federal Network Agency is subject to an increasing obligation to provide reasons in the administrative procedure. Decisions have to be thoroughly justified. This poses a particular challenge. Certain decisions add up, says Schütte: “We all have to find a reasonable balance and that may take time. However, that is also part of such great upheavals.” The legislator will now have to implement the ECJ’s judgement. A legislative proposal was published one week ago. It is important that the legal framework remains sound. Therefore, the regulations will remain in force for different transitional periods.
Subsequently, Anne-Christin Frister, presiding judge of the 3rd Cartel Panel of the Düsseldorf Higher Regional Court, informed about decisions on regulatory issues. Among other things, this concerned additional personnel costs as “permanently non-influenceable costs” (PNIC), investment measures affecting physical protection and the cancellation of awards by the Federal Network Agency for constructing and operating renewable energy installations. Frister also addressed the draft act on adapting the energy law to EU law requirements (Entwurf eines Gesetzes zur Anpassung des Energiewirtschaftsrechts an unionsrechtliche Aufgaben). According to Schütte, it is still too early to assess the legislative proposal. The courts will also face new challenges. “There are a lot of consequences,” says Frister, “but one, in particular, should not exist: a sole emphasis on the obligation to provide reasons.” The courts should not be left with the mere task of checking whether the reasons are conclusive or complete.”
Ingbert Liebing, CEO of the German Association of Local Public Utilities (VKU), discussed the aspirations and reality of the “energy transition and grid regulation”. In Liebing’s opinion, there is a wide gap between these two. Liebing summarised the “nearly impossible tasks” that are “coming our way”. The amount of work for distribution grids will increase tremendously if political guidelines are followed. Firstly, the pace of renewable energy expansion has to triple, and secondly, the transmission grid construction has to be accelerated. According to the German Association of Local Public Utilities, there is no forward-looking grid expansion, and Liebing noted a lack of problem awareness at the Federal Network Agency. But Liebing also considers positive approaches, e.g. in the legislative proposal. Moreover, Liebing also criticised the lack of technological openness in the Building Energy Act (GEG). Once again, there is a wide gap between aspiration and reality, including in terms of timing and funding. “What we need here is an increased amount of planned state support for energy supply and envisaged price brakes”, says Liebing. It gets even more challenging when it comes to hydrogen. Liebing criticised the hydrogen-critical positions of the Federal Ministry for Economic Affairs and Climate Action (BMWK). “Yes, we need the hydrogen ramp-up, and for this, we need the infrastructure. I am concerned that we will make the same mistake as we did with electricity. “
The Act on the Digitisation of the Energy Transition (GDEW) was the subject of the first panel discussion on this “regulation day”, which BBH partner Dr Jost Eder introduced by saying: “This is indeed a new start for the roll-out.” At first, the participants of the discussion described their roll-out experience. Klaus Winter, managing director of Braunschweiger Netz GmbH, believes that the roll-out will also be supported by electricity suppliers in the future. Dr Michael Sobótka, managing director of GWAdriga GmbH & Co. KG, stated that intelligent measurement technology has been available in Poland for a long time. In Germany, very strict data protection requirements apply. Steffen Arta, managing director of Stadtwerke Dreieich GmbH, was confident that the roll-out will hit the ground running. Dr Andreas Lied, working at BBHC, referred to examples from other European countries, including France, where the (nationwide) roll-out has worked well.
The panel discussion entitled “Investing in the future of energy infrastructure?” chaired by BBH partner Axel Kafka concluded this year's regulatory conference. Kafka introduced the central theme for this discussion by asking, “What exactly defines an investment in energy infrastructure as a genuine investment for the future, and which framework conditions have to be created for it?” Subsequently, the participants reported on their personal experiences regarding the regulatory framework, strategies and funding of the energy transition. Wolfgang Bühring, managing director of Stadtwerke Speyer GmbH explained: “It is important to understand that everything in this field is geared towards the long term. It is our job to make the energy supply secure and affordable. Well, now we have to do it under the new conditions. The main drivers of the energy transition are photovoltaics, wind and geothermal energy.” Jana Zöllner, managing director of Energieversorgung Nordhausen GmbH, reported on her experience with municipal heat planning in Nordhausen, which had already been completed much earlier than in the rest of Germany due to statutory requirements at the federal state level: “The municipal heat planning in cooperation with the city has worked well.” Georg Friedrichs, chair of the executive board of GASAG AG, also relies on hydrogen in view of the ongoing heat transition. “Especially because biomethane will not work if everyone uses it.” Considering the much-discussed legislative proposal for a new Energy Industry Act, the fourth discussant, BBH partner Thomas Straßer, pointed out the need for a stable regulatory framework. Straßer noted, in particular, about the expectations of private financial investors: “In light of the changed interest rate environment, a corresponding adjustment of the rates of return on equity is required as soon as possible.”
Bühring hopes that accelerated approval procedures will contribute to a faster expansion of renewable energy sources in the future and pointed out several examples of how the current legal framework and its enforcement hinder the energy transition. Zöllner has had the same experience. Friedrichs believes the problem is “that we are dealing with an administration that refuses to make mistakes.” Nevertheless, there were reasons for hope and he noticed the first signs of a speed-up in approval procedures, especially for photovoltaics and biogas. Other than that, Friedrichs advocated pragmatic solutions: “Every now and then, you have to tell the Federal Network Agency to stay out of such matters because we will take care of it. So, please be a little more economical in your regulation so that we can be pragmatic.”
After exciting discussions and insightful presentations, Prof. Dr Christian Theobald summarised his impressions of this extensive conference day. The ECJ decision and the associated new role of the Federal Network Agency were common themes in almost all discussions. Referring to the contributions of the panel discussions, Theobald also raises the possibility of thinking about reducing regulation in the future. Moreover, he added: “Regulation and unbundling are fundamentally related and correlate with access to the natural monopoly of networks; this is what the two European internal market directives have been aiming at from the very beginning. However, the energy transition and the necessary sector coupling now make it essential to fully consider all stages of the value chain. An exaggerated understanding of regulation could then quickly become a new obstacle. It also seems that policymakers are avoiding responsibility if important social and highly political decisions on the energy transition have to be made by a public authority in the future. Yet, there should be no shift in the constitutionally guaranteed and carefully balanced system of separation of powers burdening the legislature and the judiciary.”
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Prof. Dr Ines Zenke
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