Returns for electricity, gas grids in Germany could be cut more than planned

The return on equity for electricity and gas grid operators in Germany could be cut more than the Federal Network Agency plans without impeding investments in grid renovation and expansion, shows a study conducted on behalf of the Association of Energy Market Innovators and renewable electricity provider Lichtblick.

The Bundesnetagentur is planning to reduce the return to 4.59% from currently 6.91% for the electricity network for the period 2024-2028 and for the gas grid for 2023-2027. The study now shows that the return could fall to 3.79% which would reduce the price paid by customers by about EUR 800 million (USD 949.76m) for the entire four-year period. Despite the drastic cut, gas and electricity companies would not be deterred to make investments in the grid, according to the study.

Too high return rates for grid operators make electricity unnecessarily expensive for customers and thus impede the transition from fossil fuels to green electricity in all sectors, said the association's head Robert Busch. The result of high return rates is only higher profits for the monopoly companies, while customers end up paying the bill, according to Busch.

In August, the Advisory Council of the Bundesnetzgentur called on the German network regulator to keep return on equity at an investment-friendly level as the expansion of electricity and gas grids will require significant investments for the successful energy transition.

The Council did not make a specific recommendation but warned that planned reduction to 4.59% would worsen the framework investment conditions, while the expansion and renovation of electricity distribution networks alone will require around EUR 110 billion in investments by 2050.

(EUR 1 = USD 1.187)

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