Country Q&A

MULTI-JURISDICTIONAL GUIDE 2014

ENERGY AND NATURAL RESOURCES

Electricity regulation in Germany: overview

Dr Dirk Uwer and Dr Daniel J Zimmer
Hengeler Mueller

OVERVIEW
Electricity market
1.

Provide an overview of the electricity market in your

jurisdiction, including recent trends over the last 12 months.

Overview
The primary objective of German energy regulation is the supply of
electricity (and natural gas) for society as a whole that is as secure,
affordable, consumer-friendly, efficient and environmentally
sustainable as possible. To that end, the regulation of the energy
supply networks aims to ensure effective and undistorted
competition in the supply of energy and at securing a long-term
efficient and reliable operation of energy supply networks.
Furthermore, in order to protect the climate and the environment,
as well as to conserve fossil fuels, German energy policy promotes
the generation of electricity from renewable energy sources.

Recent trends
The German "energy transition" (Energiewende), proclaimed
shortly after the nuclear incident in Fukushima in March 2011, has
been one of the main drivers for recent developments and trends in
the electricity sector in Germany. The Energiewende:

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The revised EEG entered into force on 1 August 2014 (see Question
24).
In order to attract investments into the German offshore grid, the
German Energy Industry Act (Energiewirtschaftsgesetz (EnWG))
was amended in December 2012. The EnWG was amended to
provide for a more structural approach to its development, and for
a new liability regime in the case of delays in the construction, or
interruptions of the operation, of offshore grid connection lines.
After over a year in practice, the legislative changes have provided
guidelines to investors in offshore infrastructure projects, and the
overall capacity of the offshore grid has been raised to 8 gigawatts
(in the North Sea) by 2019.
The offshore grid and onshore transmission and distribution grids
require substantial investment to accommodate the increasing and
highly volatile generation of "green energy". Since the production
centres (primarily in the north and east) have moved away from the
consumption centres (primarily in the west and south), new
infrastructure projects, including direct current high-voltage power
lines, rank high on the political agenda (see Questions 14 and 17).
Finally, as electricity from renewable energy sources also benefits
from a priority connection and access to the grid (see Question 7),
the increase of green electricity pushes conventional power plants
with high marginal costs (in particular, modern gas-fired power
plants) out of the market. The ongoing discussions of a potential
move from energy-only markets to some form of "capacity
markets" is expected to gain momentum in 2014 (see Question 24).

Revealed the need for reform of the Renewable Energies Act

(Erneuerbare-Energien-Gesetz (EEG)).

Exposed a lack of special rules with respect to the expansion of

the German offshore grid.

Regulatory structure

Triggered legislative changes to push through the required

network expansion needed to integrate electricity generation
from renewable energy sources.

2.

Provoked discussions of the future of "energy only" markets

compared to capacity markets for new power plant projects.

Regulatory framework

The Energiewende has resulted in the German phase-out of

nuclear energy by 2022 and an unparalleled promotion of
electricity generation from renewable energy sources. The growing
success of these concepts has led to an increased share of "green
electricity", with around 24% of German electricity generation in
2013 (see Question 6), aiming to increase to 80% in 2050.
The Energiewende has revealed the need for reform of the EEG, the
main statutory framework for the promotion of renewable energy in
Germany. Reforms include:

The production of electricity from renewable energy sources,

which will be better integrated into the general electricity
market by moving away from the fixed feed-in tariffs ("produce
and forget") to a mandatory direct marketing scheme for new
installations.

Addressing concerns under EU state aid rules, as voiced by the

EU Commission, about the feed-in tariff regime and its
subsequent re-collection from end-users via the so-called EEGlevy (EEG-Umlage), as well as the exemptions from the EEGlevy granted to large industrial users.

This article was first published in the Energy and Natural Resources Multi-Jurisdictional Guide 2014
and is reproduced with the permission of the publisher, Thomson Reuters.
The law is stated as at 1 September 2014.

Describe the regulatory framework for the electricity sector,

including the regulatory authorities.

The energy sector in Germany is governed by a number of acts and

ordinances which are subject to constant modifications and
amendments. The main pieces of legislation are the Energy
Industry Act (Energiewirtschaftsgesetz (EnWG)) and the Renewable
Energies Act (Erneuerbare-Energien-Gesetz (EEG)).
Under the EnWG of 2005, electricity grid operators could not be
involved in electricity production or electricity sales activities of a
vertically integrated energy utility. Electricity grids, in general,
needed to be operated through legally separate entities ("legal
unbundling"). In addition, organisational structures had to
guarantee the independence of the decision-makers responsible
for the operation of the grid ("operational unbundling"). In
addition, the rules on "informational unbundling" required the
strict confidentiality of economically sensitive information obtained
through grid operations, as well as the non-discriminatory
disclosure of grid-related information potentially offering economic
benefits to the upstream or downstream level. Finally, internal
accounting as well as financial reporting had to be separated from
trade-related accounting ("unbundling of accounts").

Country Q&A

Since the transformation of the European third energy law package

into German law in 2011, the revised EnWG provides for stricter
unbundling rules for electricity transmission system operators
(TSOs). The new law provides for three unbundling models with
different levels of structural separation of grid operation from
production and supply activities. The three unbundling models are:

Full ownership unbundling.

European Union efforts to liberalise the market, starting with the

first internal energy market package in 1996, the German electricity
market has gradually become more differentiated. In addition to
regulation, the different levels of the electricity markets continue to
be subject to scrutiny by the Federal Cartel Office
(Bundeskartellamt (BKartA)). In particular, the BKartA has been
critical of minority shareholdings in municipal utilities from the
"Big Four" electricity generators: RWE, E.ON, Vattenfall or EnBW.

Independent system operator (ISO).

Generation

Independent transmission operator (ITO).

In 2013, the "Big Four" still accounted for 65.3% of electricity

production in Germany, disregarding their indirect production by
minor shareholdings in other electricity companies. However,
compared to their share of 78.5% of electricity production in
Germany in 2008, the attempt to liberalise the market appears to
have been a success.

All three models are aimed at discouraging vertically integrated

energy utilities from discriminating against competitors in terms of
access to, and investments in, the grid.

Regulatory authorities
The main regulatory authorities are the:

Federal Network Agency (Bundesnetzagentur (BNetzA)).

State regulatory authorities (Landesregulierungsbehrde).

Federal Cartel Office (Bundeskartellamt (BKartA)).

Market Transparency Authority for Electricity and Gas

(Markttransparenzstelle Strom und Gas (MTS)).

The German Monopoly Commission (Monopolkommission), which

advises the German federal government, stated in its 2013 report
that it no longer considered the electricity generation market to be
controlled by the "Big Four". Apart from these major producers and
a few other large-scale generation companies (such as STEAG), the
electricity generation market consists of a large number of
independent companies, most importantly public utility
companies.

Federal Environment Agency (Umweltbundesamt (UBA)).

Transmission

German Emission Trading Authority (Deutsche

Emissionshandelsstelle (DEHSt)).

The BNetzA and the regulatory authorities of the federal states

(Bundeslnder) are responsible for the regulation of the electricity
grids. The state regulatory authorities are responsible for
regulating energy supply companies with fewer than 100,000
customers connected to their electricity supply grids and whose
grids do not extend beyond a federal state's borders. Hence, the
BNetzA is generally competent for electricity TSOs in Germany.
The BNetzA's central task is to create the conditions for fair and
effective competition on the upstream and downstream markets
for the supply of electricity. The BNetzA's regulatory task is to:

Ensure non-discriminatory grid access.

Control grid access tariffs charged by grid operators.

Safeguard against anti-competitive practices by grid operators.

Monitor the implementation of the regulatory regime.

The BKartA is responsible for:

Merger control.

The protection of competition.

The operation of the MTS in co-operation with the BNetzA.

The UBA is the competent authority for environmental issues. It

includes the DEHSt which governs the trading of emission
certificates under the Kyoto Protocol.
See box, The regulatory authorities.

ELECTRICITY COMPANIES
Main companies
3.

What are the main companies involved in electricity

generation, transmission, distribution and supply in your
jurisdiction?

The German electricity market has undergone substantial change

over the decades. Until 1998, the market was characterised by a
few electricity companies, who benefited from regional monopolies
covering all levels of electricity production. Following on from

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The electricity generated in domestic power plants or imported into

Germany is transported to the end customers through an
interconnected electricity system. There are currently four
transmission system operators (TSOs) that form the German
interconnected system (Verbundnetz):

50Hertz.

Amprion.

TenneT TSO.

TransnetBW.

Due to the increased unbundling requirements of the European

Union, the structure of the electricity transmission market has
changed significantly over the last few years. Three of the "Big
Four" vertically integrated energy suppliers have sold at least a
majority stake of their electricity TSO to third parties. E.ON and
Vattenfall sold their transmission systems in their entirety and
RWE has retained a minority shareholding of 25% in Amprion. Only
EnBW remains as a sole owner of TransnetBW. Currently, 50Hertz
is owned by the Belgian TSO Elia and an Australian fund, Amprion
is held by a consortium of several banks and insurance companies,
and TenneT TSO is ultimately owned by the Dutch State.
For the impact of the German Energiewende (energy transition) on
electricity transmission in Germany, see Questions 8 and 14.

Distribution
German distribution system operators (DSOs) are typically owned
by municipalities. This accounts for the large number of 869
electricity DSOs in Germany in 2014. While the "Big Four" have
managed to acquire shares in numerous DSOs through
privatisation efforts by the municipalities in the past, the German
distribution market has seen a reverse trend in recent years. This is
due to municipalities, often guided by the will of the local people,
increasingly attempting to regain sole control over the DSOs
(Rekommunalisierung). Secondly, the Federal Cartel Office also
tends to prohibit new acquisitions by the "Big Four" in order to
ensure the success of the liberalisation efforts on the transmission
and generation level.

Supply
The liberalisation of the supply market has been even more
pronounced than the liberalisation of the transmission market.
Under the EnWG and the Ordinance on Electricity Network Access

Unbundling requirements
In accordance with the transposed EU unbundling requirements,
electricity grid operators on both the transmission and distribution
level must comply with legal, operational and informational
unbundling as well as unbundling of accounts. In addition,
electricity TSOs are subject to either full ownership unbundling or
must ensure that the grid operation is independent of both
electricity production and supply within a vertically integrated
energy utility (independent transmission operator (ITO)). In
Germany, a third unbundling model (independent system operator
(ISO)), provided by EU regulation, is of no practical relevance (see
Question 2).

Foreign ownership
4.

Are there any restrictions concerning the foreign ownership

of electricity companies in your jurisdiction?

The Federal Ministry of Economic Affairs and Energy

(Bundesministerium fr Wirtschaft und Energie (BMWi)) is
empowered to review the acquisition of any German company by a
non-EU purchaser or a purchaser not in the European Free Trade
Association, under the German Federal Foreign Trade Act
(Auenwirtschaftsgesetz) and its corresponding ordinance
(Auenwirtschaftsverordnung).
In order to guarantee public order and security, and to protect,
inter alia, the energy needs of Germany, the BMWi may prohibit
foreign acquisitions or impose restrictions. Despite the importance
of the electricity market, the BMWi has so far not intervened in any
foreign investments in this market.
In any case, acquisitions by foreign companies are, similar to those
of German companies, subject to merger control by either the
Federal Cartel Office (Bundeskartellamt) or the European
Commission.

Import of electricity
5.

To what extent is electricity imported in your jurisdiction

and are there interconnection issues?

Germany is currently a net exporter of electricity. In 2013, Germany

imported 43 terrawatt-hours (TWh) of electricity, but at the same
time exported 77TWh. The export surplus increased by 50%
compared to 2012, which had already been a record year. With
electricity production from renewable energy sources increasing,
and the continuing importance of conventional power generation
(to account for the volatile production from renewables and to
gradually replace phased-out nuclear power plants), it is expected
that Germany will continue to be a net exporter of electricity in the
near future.
Germany trades electricity with nearly all its neighbouring states
and Sweden. In 2013 nearly half of the German power exports went
to Austria, followed by The Netherlands, France, Denmark,
Switzerland and Sweden. Imports mainly came from Austria (40%)
and the Czech Republic (28%), followed by Switzerland, Denmark,
France, Poland and Sweden.
Such cross-border trades are today facilitated by the North
Western Europe (NWE) Price Coupling Initiative covering the Nordic
region (Denmark, Finland, Norway and Sweden), the Central

Western Europe region (BeNeLux, France and Germany) and Great

Britain. The Baltic States, Poland and Austria are indirectly part of
the system due to their tight coupling with some of the mentioned
states. In addition, a new 1400MW interconnector Nord.Link
between Norway and Germany is currently in the development
phase and scheduled to be operational by the end of 2018.

ELECTRICITY GENERATION AND RENEWABLE

ENERGY
Sources of electricity generation
6.

What are the main sources of electricity generation in your

jurisdiction?

The overall electricity generated in Germany in 2013 came from the

following sources:

Lignite (Braunkohle), 25.6%.

Renewable energy, 23.9%.

Hard coal (Steinkohle), 19.6%.

Nuclear fission, 15.4%.

Natural gas, 10.5%.

Fossil fuels
While both Germany and the EU are committed to decreasing
carbon dioxide emissions, fossil fuels are currently still the main
source for electricity generation (55.7%). They are expected to
remain important in the medium term due to the German nuclear
phase-out and the challenges of renewable energy sources (that is,
their volatility in production and insufficient transmission
capacities, see Question 8).

Nuclear fission
In Germany, since the 1970s the policy on nuclear power has been
controversial and subject to many changes in recent years. In
2000, the federal government and the operators of the German
nuclear power plants agreed on a complete nuclear phase-out,
prohibiting the construction of new plants and limiting the
generation of the existing plants to maximum quantities. In 2010,
the then federal government substantially increased the maximum
quantities, effectively extending the lifetime of the existing nuclear
power plant fleet.
However, as an immediate reaction to the Fukushima catastrophe
in March 2011, the federal government issued a moratorium
ordering the immediate shut-down of the seven oldest as well as
one additional nuclear power plant which was, at the time,
temporarily out of order due to safety issues. At the same time, the
2010 extension of nuclear power in Germany was withdrawn,
reinstating the complete phase-out from nuclear power by 2022.
Both measures have provoked a number of legal proceedings by
operators of nuclear power plants which are currently pending
before German courts. In 2014, nine nuclear power plants are still
in operation in Germany with the next plant to be shut down in
2015.

Renewable energy
Renewable energy sources accounted for 24% of German electricity
generation in 2013. It marked yet another historic high following
the overall trend of increasing importance of renewable energy
sources in the German energy mix (growing from 6% in 2000 to
20% in 2011 and 23% in 2012).
Based on the overall electricity generation, the share of the
renewables was spread over the various sources as follows:

Wind energy, 8.4%.

Biomass, 6.7%.

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Country Q&A

(Stromnetzzugangsverordnung (StromNZV)), the position of supply

companies, as well as end-consumers, is strong. Therefore there is
a large and competitive supply market. Since the beginning of the
liberalisation efforts in 1998, at least one-third of customers had
changed electricity supplier. In 2014 this ratio is expected to rise to
some 40% or 50%. Renewable energy suppliers are particularly
benefiting from this trend.

Country Q&A

Photovoltaics, 4.7%.

Hydroelectric power, 3.2%.

Renewable waste generation, 0.8%.

7.

Are there any government policies, targets or incentives in

place to encourage the use of renewable energy?

9.

Are there any plans to build new nuclear power stations in

your jurisdiction?

Since the first nuclear phase-out implemented in 2002, it is illegal

to build new nuclear power plants in Germany. The last operational
nuclear power plant will be shut down in 2022 (see Question 6).

Authorisation and operating requirements

The German policy on renewable energy is primarily regulated in
the German Renewable Energies Act (Erneuerbare-EnergienGesetz (EEG)), which is at the time of writing (summer 2014)
subject to legislative revision (see Question 1).

Government policies/incentives
Under the current EEG, electricity generation from renewable
sources enjoys, in particular, the following privileges:

Priority connection to the grid (with the grid operator's

obligation to optimise, enhance or expand the grid if necessary).

Priority access to the grid.

Fixed feed-in tariffs (or, alternatively, direct marketing including

a market premium and management fee).

10. What are the authorisation requirements to construct

electricity generation plants?
The construction of electricity generation plants generally requires
the following authorisations:

environmental impact assessment under the Federal

Environmental Audit Act (Gesetz ber die
Umweltvertrglichkeitsprfung).

A building permit under the Federal Building Act

(Baugesetzbuch) and the building acts of the federal states
(Landesbauordnungen).

Water permits for, for example, waste water discharge and

water abstraction, regulated in the Federal Water Act
(Wasserhaushaltsgesetz (WHG)) and the water acts of the
federal states (Landeswassergesetze).

Renewable energy targets

Under the coalition agreement, the current German federal
government aimed at setting the targets for the amount of
electricity generated from renewable sources to 45% in 2025 and
65% in 2035. However, the most recent draft of the EEG in 2014
softened these targets to 40% to 45% in 2025 and 55% to 60% in
2035, which nearly correspond to the targets already provided for
under the current EEG. In 2050, 80% of the electricity generation
should be sourced from renewable energies.
However, since these targets are only addressed in the general
purpose part of the EEG, they are mere policy statements. Hence,
there are no defined sanctions should these targets not be met in
the future.

A permit under the Federal Emission Control Act (BundesImmissionsschutzgesetz (BImSchG)), including an

However, the permit under the BImSchG (if required) includes any
building permits and/or installation-related water permits.
11.

Are there any requirements to ensure new power stations

are ready for carbon capture and storage (CCS) technology,
or requiring a plant to retrofit CC technology once this is
ready?

See table, Common forms of renewable energy.

8.

What are the main obstacles to the development of

renewable energy in your jurisdiction?

Both the increasing amount of electricity generated from

renewable sources and their volatility in production is challenging
both from the perspective of stability of the grid and security of
supply.
During the times when renewable energy sources generate
sufficient electricity, transmission and distribution can develop into
a "bottleneck". In comparison to traditional fossil and nuclear
plants, which are located near Germany's industrial centres in the
west and south, electricity from renewable sources is mainly
produced in the north and east, requiring transmission and
distribution capacities to the load centres in Germany. The
electricity grid development plan 2014 is aimed at addressing this
issue by, among others, providing for the construction of 800km of
new lines and the improvement of 4,400km of existing lines.
By contrast, with regard to renewable energy's low-phases, the
need for generation capacity in conventional power plants has
initiated discussions regarding different forms of capacity markets,
potentially replacing the traditional German energy-only market
(see Question 1).

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In Germany, CCS technology is regulated in the Carbon Dioxide

Storage Act (Kohlendioxid-Speicherungsgesetz (KSpG)) of 2012,
which also implements EU Directive 2009/31/EC into national law.
For political reasons, the KSpG only deals with the research on CCS
and not with its potential large-scale future use. Hence, the KSpG
itself does not contain any requirements for new generation plants.
However, under relevant environmental law provisions, new power
stations with a nominal capacity of 300MW and above already
require an assessment of respective retrofit capabilities as well as
storage or transport capacities. While there is not yet a retrofitting
obligation, relevant areas (for storage or transport) of the
construction site need to be reserved for that purpose. By contrast,
a negative assessment does not block the project's eligibility for
approval.
It should be noted that the most prominent German CCS pilot
research facility operated by Vattenfall was abandoned in April
2014 due to uncertainty about future legislation and strong
reservations by the general public.
12. What are the authorisation and main ongoing requirements
to operate electricity generation plants?
The relevant operating permits (Betriebsgenehmigungen) required
for the operation of an electricity generation plant generally
correspond to, and are already contained in, the respective
construction permits (see Question 10). There are no further
ongoing requirements except for those individually stipulated in

Since December 2012, the final shutdown of an electricity

generation plant with a nominal capacity of more than 10MW must
be
announced
to
the
"system-responsible"
(systemverantwortlicher) TSO and the Federal Network Agency
(BNetzA) at least 12 months in advance. If the plant is considered
"system-relevant" (that is, required to ensure a security of supply)
and the continued operation is technically and legally feasible, its
shutdown is prohibited.
13. What requirements are there concerning interconnection of
generation to the transmission grid?
The interconnection, that is, the physical connection
(Netzanschluss), of electricity generation facilities to the
transmission grid is regulated in the Ordinance on the Connection
of Power Plants to the Supply Grid (Kraftwerks-NetzanschlussVerordnung (KraftNAV)) (for power plants with a nominal capacity
of 100MW and above connected to the 110kV transmission grid and
above) or in the EnWG for smaller-scale power plants. Accordingly,
TSOs are generally obligated to connect power plants on an
economically reasonable, non-discriminatory and transparent
basis. In addition, the Renewable Energies Act (ErneuerbareEnergien-Gesetz (EEG)) as well as the Combined Heat and Power
Act (Kraft- Wrme- Kopplungsgesetz (KWKG)) provide for a priority
connection of renewable energy or co-generation facilities (see
Question 7).

ELECTRICITY TRANSMISSION
Authorisation and operating requirements
14. What are the authorisation requirements to construct
electricity transmission networks?
In general, the construction of transmission networks is subject to a
two-pronged authorisation process. Based on a regional land use
planning procedure under the Federal Spatial Planning Act
(Raumordnungsgesetz), a planning approval procedure under the
EnWG takes place. The approval of the plan substitutes all other
public-law permissions (Konzentrationswirkung). For both, the
authorities of the federal states are competent to approve the
plans. Therefore, projects which cover more than one federal state
necessitate the co-ordination of different state authorities.
For the construction of electricity transmission networks and to
support the German energy transition (Energiewende), two further
Acts were recently implemented:

The Federal Network Expansion Act

(Energieleitungsausbaugesetz (EnLAG)), enacted in 2009 and
amended in 2013.

The Federal Network Expansion Acceleration Act

(Netzausbaubeschleunigungsgesetz (NABEG)), enacted in 2011
and amended in 2012.

While the EnLAG left the two-pronged approach under the EnWG
unchanged, it allows several named projects to skip the usual
necessity analysis procedure (Bedarfsanalyse) under the EnWG.
Furthermore, it shortens the legal recourse for actions to only one
instance
at
the
Federal
Administrative
Court
(Bundesverwaltungsgericht). By contrast, the NABEG introduced a
simplified permitting procedure for spatial planning and
established a special planning approval procedure for certain other
projects. Most importantly, under the NABEG, the Federal Network
Agency (BNetzA) is the competent authority for both procedures.

The relevant NABEG-projects are to be found in the Federal

Necessity Plan Act (Bundesbedarfsplangesetz (BBPlG)), enacted in
2013. This statute is the result of a completely new necessity
analysis process. Under the EnWG of 2012, the four German
electricity TSOs have to submit a joint national grid development
plan to the BNetzA on 3 March each year. The plan needs to be
based on a framework scenario (Szenariorahmen) which takes into
consideration the future production and consumption of electricity.
The plan must also consider future infrastructure projects and the
non-binding, EU-wide grid development plan established by
ENTSO-E under Regulation (EC) 714/2009 (Article 8). Based on
this, the BNetzA must draft the three year federal necessity plan
(Bundesbedarfsplan), which in turn is the basis for the BBPlG.
15. What are the authorisation and main ongoing requirements
to operate electricity transmission networks?
An operating permit by the state regulatory authority and
certification by the Federal Network Agency (BNetzA) are required
to operate a transmission network. Operating a transmission
system without such a permit or certification is an administrative
offence and can be punished by a fine of up to EUR1 million or up to
three times the amount of the additional proceeds obtained by the
violation.
Under the Energy Industry Act (EnWG), grid operators are
obligated to operate a safe, reliable and efficient grid on a nondiscriminatory basis. They have to maintain, expand and optimise
the grid meeting the demands of the market, to the extent that this
is economically reasonable. In addition, TSOs responsible for a
control area are obligated to continuously ensure the capability of
the system to satisfy demands for the transmission of electricity
and, particularly, to contribute to the security of supply by the
appropriate transmission capacity and reliability of the system.
Finally, TSOs must connect power plants to their grid and grant
access to them (see Question 13).

Rates
16. How are the rates and conditions for the transmission of
electricity regulated?
While the conditions for access to electricity transmission grids are
governed by the Ordinance on Access to the Electricity Supply Grid
(Stromnetzzugangsverordnung (StromNZV)), the rates for such
access are regulated in the Ordinance on Tariffs for Access to the
Electricity Supply Grid (Stromnetzentgeltverordnung (StromNEV))
and
the
Ordinance
on
Incentive
Regulation
(Anreizregulierungsverordnung (ARegV)).
In 2009, the previous ex ante cost-oriented regulation of the grid
access tariffs was to a large extent replaced by an incentive
regulation (Anreizregulierung). It aims to enhance efficiency among
the grid operators. Different from the previous static cost-based
tariff regime, the incentive regulation stresses dynamic efficiencies.
Within a regulatory period (of five years), grid operators are allowed
to collect the economic benefits resulting from efficiency gains.
However, during the next regulatory period the benefit resulting
from the improvement in efficiency must be passed on to the
customers through a decrease in grid access tariffs.
For each grid operator, the Federal Network Agency (BNetzA)
defines a revenue cap (Erlsobergrenze) for each calendar year of a
regulatory period. For electricity TSOs, the first regulatory period
ended on 31 December 2013 and the second regulatory period
extends from 1 January 2014 to 31 December 2018.

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Country Q&A

the construction/operation permits (conditions, determinations,

and so on).

Country Q&A

ELECTRICITY DISTRIBUTION
Authorisation and operating requirements
17. What are the authorisation requirements to construct
electricity distribution systems?
The authorisation requirements for the construction of electricity
distribution systems are generally the same as for transmission
systems (see Question 14). However, distribution network operators
do not benefit from either the Federal Network Expansion Act
(EnLAG) or Federal Network Expansion Acceleration Act (NABEG)
procedures as those are reserved for projects on the transmission
level.
18. What are the authorisation and the main ongoing
requirements to operate electricity distribution systems?
The requirements to operate distribution systems in Germany are
equivalent to those for transmission systems (see Question 15) with
the exception that distribution system operators do not need to be
certified by the Federal Network Agency (BNetzA).
Under the Energy Industry Act (EnWG), distribution system
operators (DSOs) are responsible for the safety and reliability of
their grids. They are also generally responsible for (smart) metering
to monitor both electricity consumption and effective utilisation
periods. Larger DSOs also have to annually report the current state
of their grids and the impact of the expanding renewable energy
sources to the competent regulatory authority. As regards the
latter, DSOs are obligated to grant both priority connection and
access to operators of renewable energy facilities under the EEG
(see Question 7).

Rates
19. How are the rates and conditions for the distribution of
electricity regulated?

(Grundversorgung), subject to the Ordinance on Electricity Basic

Supply (Stromgrundversorgungsverordnung (StromGVV)).

Trading between generators and suppliers

21. How is electricity trading (between generators and
suppliers) regulated?
Both stock exchange trading and over-the-counter trading of
electricity are subject to general trading regulations.
With regard to specific energy regulation, the EU Regulation
1227/2011 on wholesale energy market integrity and transparency
(REMIT) is aimed at combatting electricity insider trading and
market manipulation. In co-operation with the Federal Network
Agency (BNetzA) and the Federal Cartel Office (Bundeskartellamt),
the newly established Market Transparency Authority for Electricity
and Gas (Markttransparenzstelle Strom und Gas) acts as the
national monitoring body under REMIT. Non-compliance with
REMIT may constitute an administrative offence and be subject to
a fine of up to EUR1 million. A breach may even constitute a
criminal offence punishable with imprisonment of up to five years.

Rates and conditions of sale

22. How are the rates and conditions of sale regulated at the
consumer and wholesale level?

Consumer
Conditions of sale are subject to the guidelines on business
processes
for
the
electricity
supply
of
customers
(Geschftsprozesse zur Kundenbelieferung mit Elektrizitt (GPKE)).
In order to encourage competition, the GPKE provides, in
particular, rules for transparent billing and for changes of supplier.
In addition, basic suppliers (see Question 20) must publish their
basic tariff and supply household customers in accordance with the
Ordinance
on
Electricity
Basic
Supply
(Stromgrundversorgungsverordnung (StromGVV)).

Wholesale
The rates and conditions for access to distribution systems are
generally equivalent to those for transmission systems (see
Question 16). However, under the current incentive regulation
scheme, investments on the distribution level are treated
differently from the transmission level. In addition, tariffs for
electricity distribution systems are calculated by taking into
account a quality element reflecting network reliability and
network performance.

On the wholesale level, the trading of electricity is done at the

stock exchange as well as over-the-counter. There is no sectorspecific regulation except for the monitoring by the Federal
Network Agency (BNetzA), the Federal Cartel Office (BKartA) and
their new joint authority MTS Strom und Gas (see Question 21).

ELECTRICITY SUPPLY
Authorisation and operating requirements

23. What are the main tax issues arising on electricity

generation, distribution and supply?

20. What are the authorisation and the main ongoing

requirements to supply electricity systems?

In Germany, electricity is subject to electricity tax (2.05ct/KWh) and

the general value added tax (19%), both to be paid by the endconsumer.

The commencement or termination of supply of electricity to

household customers must be notified to the competent regulatory
authority, the Federal Network Agency (BNetzA) or the respective
state regulatory authority (see Question 2). The authority is
empowered to prohibit the business at any time if the supplier does
not have the adequate human, technical or economic resources.

However, there are several additional costs and levies passed on to

the private end-consumer. Accordingly, only 31% of the price for
electricity paid by household consumers reflects the actual
electricity price, whereas the remaining 69% consists of:

In 2006, the BNetzA issued guidelines on business processes for

the supply of electricity to customers (Geschftsprozesse zur
Kundenbelieferung mit Elektrizitt (GPKE)). The supply companies
must comply with these rules. In addition to these general
requirements, the supply company with the highest market share
in a given network area is responsible for the basic supply

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TAX ISSUES

20% for the network access fees (see Question 16).

18% for the EEG levy (EEG-Umlage), for additional costs arising
from the fixed feed-in tariff scheme for electricity generated
from renewable sources (see Question 7).

16% for value added tax.

7% for electricity tax.

6% for concession fees (Konzessionsabgabe).

1% for the Section 19 StromNEV-levy ( 19 StromNEV-Umlage),

for the reduction of, or exemption from, network access tariffs
for large electricity consumers (see below).

1% for the offshore liability levy (Offshore-Haftungsumlage), for

compensation payments from the responsible TSOs to
operators of offshore wind farms for delays in the construction
and/or interruptions of the operation of offshore connection
lines.

0.4% for the KWK levy (KWK-Umlage), for additional costs

arising from the fixed surcharge for operators of co-generation
plants.

The Section 19 StromNEV-levy is currently under review both by the

German Federal Supreme Court (Bundesgerichtshof) and, with
respect to state aid rules, the EU Commission. In March 2013, the
Higher Regional Court (Oberlandesgericht) of Dsseldorf ruled that
the exemption from network access tariffs lacked a legal basis and
that, hence, the Section 19 StromNEV-levy was unlawful.
In January 2014, another surcharge to the electricity price was
introduced to apply for the following two years. The surcharge was

for the sheddable load-levy for compensation payments to

operators of appliances (Verbrauchseinrichtungen) in accordance
with the Ordinance on Agreements on Sheddable Loads
(Verordnung ber Vereinbarungen zu abschaltbaren Lasten). In
2014, the levy amounts to 0,009 ct/kWh.

REFORM
24. What reform proposals are there for the regulation of the
electricity sector?
The reform of the Renewable Energies Act (EEG) (see Question 1)
entered into force on 1 August 2014. In addition, the Federal
Minister of Economic Affairs and Energy, Sigmar Gabriel, has
announced that the political debate concerning capacity markets
will be initiated shortly after the conclusion of the EEG reform.
Furthermore, in the course of 2014, the Federal Network Agency
(BNetzA) will present an evaluation report on the incentive
regulation. The report will also contain suggestions by the
regulator with respect to the further evolution of the incentive
regulation. This will mark the first step towards the revision of the
incentive regulation prior to the beginning of the third regulatory
period (for gas network operators) in 2018.

THE REGULATORY AUTHORITIES

Federal Network Agency (Bundesnetzagentur (BNetzA))
Address. Tulpenfeld 4, D-53113 Bonn, Germany
T +49 228 140
F +49 228 14 88 72
E info@bnetza.de
W www.bundesnetzagentur.de
Main responsibilities. All regulatory tasks and powers which, under the EnWG (Energy Industry Act), have not been assigned to the
state regulatory authorities are performed by the BNetzA. Its regulatory task covers ensuring non-discriminatory grid access, the control
of the grid access tariffs charged by grid operators, the safeguarding against anti-competitive practices by grid operators and the
monitoring of the implementation of the regulatory regime.

Federal Cartel Office (Bundeskartellamt (BKartA))

Address. Kaiser-Friedrich-Str 16, D-53113 Bonn, Germany
T +49 228 9499 0
F +49 228 9499 400
E info@bundeskartellamt.bund.de
W www.bundeskartellamt.de
Main responsibilities. The BKartA is responsible for the protection of competition including merger control. It also operates the Market
Transparency Authority MTS in co-operation with the BNetzA.

Federal Environment Agency (Umweltbundesamt (UBA))

Address. Wrlitzer Platz 1, D-06844 Dessau, Germany
T +49 340 2103 2416
F +49 340 2103 2285
E buergerservice@uba.de
W www.umweltbundesamt.de
Main responsibilities. The UBA is the competent authority for environmental issues. It includes the German Emission Trading Authority
(Deutsche Emissionshandelsstelle (DEHSt)) which governs the trading of emissions certificates under the Kyoto Protocol.

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Country Q&A

Country Q&A

ONLINE RESOURCES
W www.clearingstelle-eeg.de/english
Description. This is an official up-to-date website in English with information on renewable energy sources.
W http://bmwi.de/EN/root.html
Description. This is the up-to-date English website of the Federal Ministry for Economic Affairs and Energy. Apart from general
information on German energy policy, the website especially provides content on the Energiewende.
W http://www.bundesnetzagentur.de/cln_1422/EN/Home/home_node.html
Description. This is the official up-to-date English website of the Federal Network Agency. Apart from general information on electricity
regulation, the site contains numerous recent statistics.
W www.gesetze-im-internet.de
Description. This is the official up-to-date website of the Federal Ministry of Justice with all texts of legal acts (in German).

Practical Law Contributor profiles

Dr Dirk Uwer, Partner

Dr Daniel J Zimmer, Counsel

Hengeler Mueller

Hengeler Mueller

T
F
E
W

+49 211 8304 141

+49 211 8304 170
dirk.uwer@hengeler.com
www.hengeler.com

T
F
E
W

+49 211 8304 753

+49 211 8304 170
daniel.zimmer@hengeler.com
www.hengeler.com

Professional qualifications. Admitted to German bar.

Professional qualifications. Admitted to German bar.

Areas of practice. Energy; regulatory and environment; public law;

compliance.

Areas of practice. Energy; competition.

Non-professional qualifications. Dr. jur., University of Berlin;

Mag.rer.publ., German University of Administrative Sciences,
Speyer; LLM, Northumbria University, England.
Languages. German, English, Italian
Publications. More than 50 publications on various topics of
European and German public law with a particular focus on
environmental and energy law.

Non-professional qualifications. Dr. jur., University of Bonn; LLM,

Duke University, Durham, USA.
Languages. German, English
Publications

The New German Offshore Liability Regime Its First Year in

Practice, EEJ 2014, p77 to 81.

The German Offshore Transmission Grid (Finally) A Success

Story?, RELP 2013, p. 32 to 41 (with Jrg Meinzenbach and Juan

Restrepo Rodrguez).

"Network Acquisition from an Investor's Perspective: Importance

of the Rules on Imputed Depreciation and Return on Equity
under the Ordinance on Electricity Network Tariffs, Gas Network
Tariffs and Incentive Regulation for the Investment Decision"
(Netzerwerb aus Investorensicht: Zur Bedeutung der Regelungen
zur kalkulatorischen Abschreibung und Eigenkapitalverzinsung
nach StromNEV, GasNEV und ARegV fr die
Investitionsentscheidung), RdE 2009, p109 to 118 (with Dirk

Uwer).

global.practicallaw.com/energy-mjg