Energy-Cities

09/17/2021 | Press release | Distributed by Public on 09/17/2021 02:51

Getting a grip on the grid: Energy communities in Germany and France

We know the immense potential of community energy for delivering a just transition. That is why we regularly share good examples and encourage municipalities and other local actors to support citizen energy or set up their own community. But let's be realistic, too: energy communities still face many barriers and the access to the grid is one of them. High connection prices, complex procedures or baffling technical requirements can daunt non-professional players and hinder or downscale community projects. Our intern Andrea Wainer recently finished her thesis at the Environment and Resource management master's program of the VU University in Amsterdam. In this article we share some of her insights on the challenges and opportunities for energy communities to access the grid in France and Germany.

A contrasting set-up: two countries, two ways of managing the grid

France and Germany are two countries with contrasting governance models of the distribution network. In France, one national company manages 95% of the country's distribution grids while in Germany, about 900 companies operate locally. Let's expose some of the advantages and drawbacks of each system:

Most often, community energy initiatives are connected to the distribution grids, which are locally managed by Distribution System Operators (DSOs). According to Wainer's survey, it is not rare that project holders report a difficult relationship with the DSO.

The study emphasizes the enabling power of national regulations such as the priority for renewable energy sources to enter the grid, and the obligation for DSOs to connect them first. This is already the case in Germany, but not yet in France. In both countries the connection rules apply to all renewable power plants without any particular support for renewable producers with a social agenda.

Another important factor is the connection price. While French project holders must bear the costs of the grid optimization needed to connect new power plants, in Germany these costs are mostly paid by the DSOs - and eventually passed on to the consumers via the electricity bill. This could foster inequalities and leave behind those who cannot afford to participate in community energy projects but must, however, pay the price of the grid improvements.

The connection rules and prices are set nationally: What can municipalities do?

The energy distribution is a regulated activity, i.e. priority to access the grid, connection rules and prices are set and enforced at the national level by the regulatory authorities. This does not mean city administrations cannot help community energy organisations in feeding their electricity to the grid. This is even easier when cities own and manage their own distribution network or when a municipal company operates the distribution system. In Germany this is possible: municipal utilities ('Stadtwerke') have a long history of local resource management (700 out of the 900 German DSOs are Stadtwerke) and the country has seen a remunicipalisation movement gain momentum in the past years. That's not the case on the other side of the Rhine: although French cities are the official owners of the local grids, the concession of 95% of the distribution network goes by law to a unique DSO.

Some may argue that too many small distributors operating simultaneously may lack technical capacity or the possibility to deploy national strategies, such as the rollout of smart meters, which can prevent costly expansions of the grid by enabling demand-side solutions.

However, even when municipalities are not entitled to manage their distribution network, they can successfully support energy communities (check our guide!) in the connection process: In France, several cities and associations of energy communities (such as Energie Partagée) implemented cooperation agreements with the national DSO. These agreements allow for dialogue between DSOs, municipalities and energy communities around connection issues. All the interviewees of the study agreed that this type of cooperation has proven to be very useful.

Besides, in many EU countries, the connection of new power plants is implemented based on the 'first arrived, first-served' principle, resulting in random and possibly unfair connection prices. This could be, at least partly, solved if planning schemes were set to forecast and mutualize grid optimization costs among project holders. The EU Directive on common rules for the internal electricity market directive (2019) stipulates that Member States should introduce distribution network development plans. Based on that, France introduced a bi-annual planning obligation for DSOs, not yet transposed in application decrees.

Cities connecting the dots for an optimised and fair access

Andrea Wainer suggests that cities could set up 'local planning bodies'. Their role would be to involve citizens and their local DSO in the identification of suitable locations for new power plants, and the grid optimizations required to connect them. DSOs counterargue that their obligation to non-discrimination and their 'business secret' prevent them from revealing potential competing projects. Similarly, counselling activities might be seen by the regulatory authorities as a violation of the unbundling obligation. Indeed, one of the principles of the EU energy market is to separate electricity distribution from competitive activities. This obligation aims to ensure non-discriminatory access to the grid. As regulated companies, DSOs are not allowed to perform competitive activities such as energy production or aggregation. Municipalities could play a 'hub' role in the grid optimization planning.

Finally, the thesis also suggests that cities could also have a closer look at the incidence of the grid financing mechanisms on the connection costs while monitoring the transposition of EU directives under the Fit for 55 package in their country. Municipalities are in close contact with energy communities and know the difficulties citizen's face with their energy bills. From this experience, they could draft recommendations for financing the connection costs. Financing alternatives would include revenues other than citizens' contributions and they would allow energy communities to connect without putting extra burden on those who cannot participate in them.

One thing is clear: Connection issues are highly dependent on and intertwined with the broader national strategies and regulations for renewable energy. They are conditioned by financial incentives, by the way the grid is financed in each country, and finally, by the European rules of the common electricity market. More and more policy-makers recognize the potential of energy communities to contribute to the energy transition, to bring social and economic benefits. The rules to access the grid and the mechanisms to finance it should integrate these new players in the fairest way.

For additional input to this debate or if you wish to read the full thesis, please contact Andrea directly.