ElWG Check 2.0: What does the power grid cost?

Authors: Johannes Hartlieb, Alexander Gimona

The new Electricity Industry Act (ElWG) aims to adjust the rules for using the power grids. The focus is on system usage fees, i.e., the fees that all grid users pay for access to and use of the grid. In the future, these charges are to be paid increasingly by electricity producers. But what does this mean in practice – and why is this topic drawing so much criticism?

“The transformation of our electricity system is a task for society as a whole – and clarity, fairness, and a willingness to innovate are our guiding principles.”

Federal Minister for Economy, Energy and Tourism – Hattmannsdorfer

ElWOG vs. ElWG – what is changing?

First, the ElWG is intended to simplify system usage fees. The number of different fees will be reduced. For example, the fee for metering services will be eliminated.

1. From network access and network provision to grid connection fees

Previously, a distinction was made between network access fees and network provision fees. In the future, these will be merged and levied as a network connection fee (section 122 ElWG). This fee covers the construction of the initial physical grid connection. The goal is to achieve simplification while also promising greater transparency in the cost structure.

However, there is criticism from the producer side: Industry associations warn that the new regulation effectively introduces a new fee for producers through the back door (namely the network provision fee) and thus jeopardizes the economic viability of projects.

In contrast, representatives from the grid sector have expressed positive views, welcoming the new, stronger weighting of the performance component in the fee regulations, as it enables a more cost-causation-based allocation of grid costs.

2. Network usage fees also for feeders

Arguably the most controversial change: According to section 120(2) ElWG, feeders – i.e., producers of (green) electricity – will also have to pay network usage fees in the future, not just consumers. This means that operators of PV systems or wind farms will face additional charges. The network usage fee serves to cover the grid operator’s expenses for the construction, expansion, maintenance, and operation of the grid system, i.e., the provision of a functional grid.

The statements from industry associations on these changes are correspondingly clear:

Representatives from the producer side clearly reject the expansion. Additional network usage fees would only raise electricity prices without relieving businesses or households. Instead, a carefully planned grid expansion and time to allow the other ElWG measures to take effect are needed.
Furthermore, there would be a competitive disadvantage compared to foreign producers. Austria already has some of the highest grid costs for producers in Europe.

3. System service as a new guiding principle

A new feature is the stronger alignment of system usage fees with system service [“system-serving operation” in section 6 no. 142 EIWG – Electricity Industry Act]. A plant is considered system-serving if it contributes to the stability of the power grid through flexible operation, such as the reduction of peak loads or through site selection in accordance with grid requirements, thereby reducing overall network costs. Anyone who feeds into the grid in a grid-supportive manner, shifts loads, or operates storage facilities flexibly should therefore be exempt from usage fees.

The details are to be defined by regulation. In their comments on the draft law, producer-side industry associations demand clear and transparent criteria: unclear rules jeopardize investment decisions.

4. Enhanced authority of the regulatory agency

Under the new ElWG, E-Control, as the competent regulatory authority, gains expanded responsibilities: In addition to determining the specific level of system usage fees, it will also be responsible for the fundamental methods of fee calculation. This includes, for example, defining fee components and assessment bases, tariff periods, and billing modalities. In addition, it can regulate discounts, surcharges, or flat rates for dynamic tariffs. The ElWG grants the authority considerable discretion in this regard.

This shifts the competence to the regulatory authority in order to strengthen its independence and flexibility. Under European law, Austria is thus implementing the requirements of the ECJ ruling C-718/18: The national regulatory authority’s independence under EU law is only guaranteed if it independently decides on methods and principles.

“We set a maximum cap for network usage fees and create an exemption for smaller, grid-supportive facilities.“
Federal Minister for Economy, Energy and Tourism – Hattmannsdorfer

Federal Minister Hattmannsdorfer recently suggested in a press release and subsequent interviews a possible cap on fees for large facilities or the elimination of fees for small facilities – such as private PV systems. However, taking into account ECJ case law, a statutory cap appears problematic, as it could conflict with the principles of independence of the regulatory authority required by the ECJ.

5. Controversy over “peak capping”

Closely linked to grid fees is the planned option of peak capping (section 94a ElWG); grid operators would be able to limit the feed-in capacity of generation plants.

Producer-side industry representatives consider a flat cap at 60% an “excessive intervention” and call for a limit of 70% as well as exemptions for hybrid plants or flexible grid access.
Furthermore, they argue that a flat cap for wind power plants in particular is inappropriate, since wind energy is fed into the grid at varying times and locations and is especially indispensable in winter.

Conclusion

With the reform of system usage fees, the legislator aims to achieve a more cost-causation-based allocation of costs and stronger incentives for grid-supportive behavior. In practice, however, the changes could lead to additional burdens for renewable energy producers and jeopardize investments.

Whether the new system will actually accelerate the energy transition or create new hurdles will crucially depend on how E-Control concretely addresses the open questions, in particular those relating to system service, peak capping, and fee structure.

Disclaimer

This article is for general information only and does not replace legal advice. Haslinger / Nagele Rechtsanwälte GmbH assumes no liability for the content and correctness of this article.