03/22/2011

BDEW presents study on distribution networks to the 2011 "Networks' Meeting Point"

Substantial development of distribution networks required

Investments of up to 13 billion Euros and extension of distribution networks by 195,000 kilometres required / Regulation in line with market conditions is prerequisite for investments

Berlin, 22 March 2011 - "We must urgently extend the debate about the necessary network development to distribution networks with a view to integrating renewable energies. Taking only transmission networks into consideration falls too short as renewables-based electricity is increasingly fed into distribution networks due to the strong growth in the field of photovoltaic plants", Roger Kohlmann, Member of the General Executive Management Board of the German Association of Energy and Water Industries (Bundesverband der Energie- und Wasserwirtschaft - BDEW) said today on the occasion of the "Networks’ Meeting Point" in Berlin. A study carried out on behalf of BDEW was presented to this event. The study determined the need for extension of German distribution networks to integrate renewable energies into electricity supply by the year 2020. The study analysed the necessary investments on the basis of the increase in installed wind and photovoltaic capacity expected by the German Federal Government until 2020.

According to the BDEW, a cost estimation was prevented by the fact that the German Federal Government uses different figures regarding photovoltaic and onshore wind power plants. The scenario used for the Federal Government’s energy concept assumed e.g. an installed photovoltaic capacity of 33.3 Gigawatt in 2020. Using these figures as a basis, the necessary investments would total up to 13 billion Euros, according to the BDEW study. The concrete need for the extension of the distribution network would then amount to approximately 195,000 kilometres.

On the other hand, the German Federal Ministry for the Environment (BMU) had assumed a much higher value in its 2010 pilot scenario, i.e. an increase in wind and photovoltaic capacity of 51.8 GW. This figure was reported by the Federal Government to Brussels. For this value, too, the study determined the concrete investment and development need: Using the BMU’s pilot scenario as a basis, necessary investments of up to 27 billion Euros are required until 2020. According to BDEW, an overall extension by approximately 380,000 kilometres will then be required in the distribution network. "Whatever extension value stated by the government is closer to reality, the BDEW shows very clearly that considerable investments are required in both cases if the integration of renewable energies shall be successful", Kohlmann said.

To be able to finance these investments, the energy industry needed regulation in conformity with market conditions. Otherwise, the necessary capital could not be procured. "The rates of return on investments in transmission and distribution networks in Germany must at least be as attractive as those on alternative or capital market investments. In view of the urgency of network development and restructuring, they actually must be even much more attractive. Moreover, competition among regulatory schemes for the most efficient regulation will also develop", Kohlmann said.

BDEW considers that it would be expedient and factually correct if the German Network Agency took international comparative markets as a basis for the determination of the rate of return on equity. Today’s risk premium for investments in energy networks totals 3.6 percent in Germany and is thus below any risk premiums in the European Union except for Denmark.

"One thing is quite clear: Higher risk premiums in other countries lead to a considerable competitive drawback for German network operators", Kohlmann said. He concluded that regulation in Germany must ensure sufficient incentives for investments in both transmission and distribution networks.

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Jan Ulland
Pressesprecher / Press Spokesman
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