Battery Storage in Germany: A Grid Operator’s View - 50Hertz

Ed Porter (0:00)

I'm your host, Ed Porter. Welcome back to Transmission.

Around 180 projects applied to connect to 50Hertz grid this year. That's more than 80 gigawatts, roughly Germany's entire peak demand, and 50Hertz is just one of four Transmission grid operators.

Not all of it will get built. Under first come, first served, developers were, as today's guest puts it, putting their towel on the sun lounger. So Germany changed the rules. Maturity now beats speed, but connecting is only half of it. Germany already spends about 4 billion euros a year on grid congestion. Tens of gigawatts of merchant batteries could push that up or bring it down. My guest today is Wilhelm Kiewitt, head of energy economics at 50Hertz. His job, design a market where batteries are worth building, and the grid still runs smoothly once they are. Building in Germany? Ask Ko what a battery earns there today, how it stacks up against solar or wind, and where power prices are heading. Sign up is free at modoenergy.com. Let's jump in.

Hello, Wilhelm. Welcome to Transmission.

Wilhelm Kiewitt (1:10)

Thank you.

Ed Porter (1:11)

As ever, let's get straight into it. What is one thing that people get wrong about what it takes to build batteries in Germany and to keep them useful to the system once they're there?

Wilhelm Kiewitt (1:23)

Well, one very first thing is that people usually think that there's only one grid allocation scheme in Germany for all different kinds of asset classes. That's not correct. So we have one scheme for power plants, we have one for renewables, and then we have one for loads, like electrolyzers, like industry loads. And there was a huge debate in Germany, which kind of grid allocation scheme should be used for batteries.

And that is the reason why the ESOs in Germany have then invented that so-called maturity-based allocation scheme. And this is something super new, and something that we still need to put into legal framework. But that was kind of what we just built in the last year.

Ed Porter (2:02)

And we're talking about here allocation of grid connection capacities, right? So this is when people aren't yet connected to the grid, but want to get connected. This is the process that's being changed. And if you summarize that, how is it changing for those batteries coming through?

What's new about it?

Wilhelm Kiewitt (2:17)

Yeah, well, we were first-hand in a so-called first-come, first-served principle.

And that is also one of the main explanations why we see that huge so-called battery wave over the last years in the German electricity system, because people were just kind of putting their towel there, hoping to get a slot and then be among the first ones. And obviously, this is not, from a systemic point of view, not an efficient scheme, just because you don't get rewarded because of your maturity, because of if you really are able to actually use the connection, but more about the speed that you just put on the button. And that cannot be, of course, the way we allocate grid access.

Ed Porter (2:59)

Yes. And does this new process, does it create more connection capacity, or is it more around deciding more fairly who's standing at the front of the queue?

Wilhelm Kiewitt (3:08)

Well, it's actually not creating more connections.

Well, partly. I would say physically, in the end, the amount of grid codes, grid nodes that we can build is limited, is limited by the amount of people we have. Electrical engineers. Exactly. But of course, what it does, it tries to increase the maturity of each and every single applicant. And that, of course, then hopefully also in the end leads to the fact that more really invested assets can actually be connected. So I would say it's twofold. It physically not necessarily creates more capacity, but it makes more capacity usable for more grid users.

Ed Porter (3:52)

And we should get excited about that, right? Because it allows companies that want to bring these projects to life to get their sort of assets to play quickly, but also for consumers, it lets them see the benefits of having these technologies deployed quicker as well. So something like hopefully both parties can get behind.

Wilhelm Kiewitt (4:06)

Correct. Correct. And this is specifically important because during the energy transition in Germany, we do need a different kind of asset fleet.

So we cannot no longer rely only on renewables and on some sort of fossil power plants, but we also need more flexibility in the system. And this is exactly where batteries come into play.

Ed Porter (4:25)

Okay. And when you're ranking projects based on maturity, does that risk favoring those who are ready to go with the deposits, those that have a good cash reserve, even though there might be other groups who have not got so ready access to cash, but they have got good projects? Are you worried about that?