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1 March 2023

Germany pushes to merge grid operators

Local news reports suggest that the German government is pushing ahead with plans to merge its four high-voltage Transmission System Operators (TSOs) – namely TenneT, 50Hertz, TransNet BW, and Amprion, by purchasing stakes in each company. In the case of TenneT, the payment for its German subsidiary may come to $21 billion.

The Economy Ministry has openly acknowledged that discussions are underway with TenneT and TransnetBW. Germany bought a 20% stake in 50Hertz in 2018 while EnBW has offered to sell a 49.9% stake in TransnetBW, which it owns. Bloomberg this week cited anonymous sources saying that Amprion stakeholders support the merger.

This reunification of the grid will substantively revert former Angela Merkel’s privatization of the grid, which is blamed by some for “splintering responsibilities” and “slow modernization.” One major flaw in the federal German grid has been a lack of large-scale transmission suitable for powering southwestern demand centers from northern wind power centers. German offshore wind should grow from 8 GW at present to 30 GW in 2030.

The Netherlands Government owns TenneT and signed an agreement with Germany in May 2020 to consider sale of a stake in the company, to assist the utility’s $53 billion investment plan for the decade, of which 70% would be in German coverage areas. In November it was reported that talks had resumed after stalling through some of 2022, and that an agreement would be likely in the first half of 2023. The two governments now say they aim to reach an agreement in May.

As per a letter from November 2020 from the German Finance Ministry to the Bundestag, “The preservation of appropriate rights and influence on TenneT Germany are of central importance to the goal of accelerating the energy transition and achieving net-zero in 2045.” Meanwhile the Dutch Finance Minister observed that the capital needs of Tennet’s German segment had increased to $11.4 billion, and that fresh capital for this area of the business would be needed by early 2024, while the Dutch government would, understandably enough, only provide for TenneT’ operations in the Netherlands itself.

In related news, 50Hertz, Amprion, and TenneT this week published plans alongside the German Ministry for Economic Affairs, according to which 10 GW of offshore wind would be interconnected as part of a broad network linking to Denmark and the Netherlands. This past week also saw TenneT’s German section include EV batteries in its VPP operations.

Last year we observed that German grid investment projects had been put at $4 billion per annum in 2020, but had been projected at more like $6 billion in a Grid Development Plan by the four Transmission System Operators (TSOs) in 2021, a level that was actually reached just the next year, in 2022.

As the Russia sanctions continue to bite and global solar installations grow by 50% this year, the pace of the energy transition is even faster than expectations. More of it is occurring now in the 2020s, instead of being left to the 2030s and 40s, so it would not be surprising if German grid investment has to reach well above $10 billion a year for the latter part of this decade.

As the supply of solar modules and wind turbines increases to meet demand, transmission will become a main bottleneck for the energy transition, perhaps the central one. Another, at least for solar, will be workforce availability. The German Solar Industry Association (BSW) has announced a deal with the Indian Skill Council for Green Jobs to source skilled Indian laborers for solar power project development – yet another development from just the past week.

Economy Minister Robert Habeck stated last week that German annual power demand will rise from 550 TWh today to between 700 TWh and 750 TWh in 2030, and “easily” 1,000 TWh by 2045. He also stated that the government would pursue three core measures to accelerate renewable energy development – financial support for projects, hedging tools and subsidies for innovation – as well as changes to tax provisions, in the wake of the EU Commission February 1st decision allowing increased state aid for the industry.