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Energy supply: What sales poker about the German power grid is really about

Energy supply: What sales poker about the German power grid is really about

The federal government already holds shares in two out of four electricity network operators. More are to be added. With whom negotiations are still ongoing and what partial nationalization would mean for consumers.

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Only four companies – 50 Hertz, Amprion, Tennet and TransnetBW – control the extra-high voltage network in Germany, which has a total length of around 37,000 kilometers. In the next few years, significantly more kilometers of route are to be added so that electricity from renewable energies can be transported over long distances and actually reach every socket.

Expanding the transmission networks will be expensive. According to the network development plan, at least 300 billion euros by 2045. The upcoming billion-dollar investments are worrying the network operators, and some are therefore considering selling their shares in the electricity network.

Beneficial for both sides

One interested party: the federal government. For them, the expansion of the grid is a pressing concern. After all, the electricity transmission networks are considered the backbone of the energy transition and are essential for maintaining security of supply. Being more closely involved with the grid operators would be a unique opportunity for the federal government. Even through minority shareholdings, it could influence critical infrastructure and gain insight into whether the expansion of the grid is progressing as necessary and politically desired.Consumer Energy Prices Interview

Partial nationalization would also solve a problem for network operators: in order to finance network expansion in Germany, they would have to take on high levels of debt. And this is only available if you have good credit. But the operators are not necessarily prepared to secure their creditworthiness with the grant of equity capital. State participation could secure future investments. Another hope: operators and politicians could better coordinate regulation, planning and implementation of network expansion and thus reduce costs.

The federal government is negotiating with operator Tennet

The federal government has been negotiating for months with the Dutch state-owned company Tennet, which maintains the electricity highways from Schleswig-Holstein to Bavaria. Tennet’s 2023 annual report states that both the Dutch and German governments prefer to only finance their own national electricity infrastructure. “The discussions are still ongoing,” a spokesman for the Federal Ministry of Economics confirmed to “Capital” at the beginning of the week.

But the lengthy negotiations have apparently made Tennet impatient: On Thursday, the network operator announced that it would also examine other options because it had not yet reached a conclusion with Germany. Therefore, it will “look for alternative structural solutions in close cooperation with the Dutch state as the sole shareholder,” Tennet said in a press release. Possible participation by private investors is also on the table as an option, as is a possible IPO in order to raise equity on the public capital markets.

The federal government already has a stake in two network operators: the federal government holds 20 percent of the company 50 Hertz, which supplies the east of the country and parts of northern Germany. The remaining shares belong to the Belgian company Elia.

TransnetBW’s network area is predominantly in Baden-Württemberg. In spring 2023, the majority owner, the energy company EnBW, initially sold a 24.95 percent stake to a savings bank consortium. Later in the year, the federal government also acquired a minority stake of 24.95 percent in TransnetBW.

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Fourth network operator examines sale

The fourth network operator could also soon be partly on offer. Amprion takes care of the extra-high voltage network in the west and southwest. The majority owner, with 74.9 percent, is M31 Beteiligungsgesellschaft, a consortium of pension funds and insurers such as Swiss Life and Talanx. The energy company RWE, which holds the remaining 25.1 percent of Amprion, is considering selling its stake, as the “Handelsblatt” reported. “In view of the high capital requirements for network expansion, we are currently examining various options and financing options with regard to our Amprion investment,” said a spokesman for Capital.

However, the Federal Ministry of Economics is holding back as long as RWE doesn’t officially put anything up for sale: There is “currently no need for action” regarding a stake in Amprion, a spokesman for the ministry responded to “Capital”‘s query.

Expansion and increasing demand are driving up electricity costs

The upcoming billion-dollar investments are also a concern for consumers. Although the operators initially advance the costs of network expansion, they later recover these from customers through network fees. With significant investments in electricity highways, the need to pass on costs also increases. Network fees are likely to increase as a result. Energy experts don’t want to commit to how much. STERN PAID What do we know about wind energy storage? April 18th

One thing is clear: network fees already vary greatly from region to region. Where the network operators have already invested heavily in electricity infrastructure, the fees are high: consumers in the north and east, in whose regions wind and solar energy have been expanded, currently pay more than customers in the west and south. Supply is also more expensive in rural areas than in the city.

This distribution is likely to change in the future. As the energy transition increases and the grid expands, it will become more expensive in the regions that are more dependent on electricity highways carrying renewable energy to them. In addition, costs are likely to rise because citizens’ electricity needs are increasing. Because of electric cars and heat pumps, households will in the future consume significantly more electricity than usual.

Nationalization of parts of the transmission network is unlikely to change these developments. The demand for electricity is increasing anyway, and investments in the network will be necessary with or without government involvement.

Source: Stern

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