Renewables can destabilise the grid when the sun is not shining, and the wind is not blowing. Batteries, which store electricity when it is produced in abundance and feed it back into the grid when it is scarce, can solve this problem. So far, so simple.
Alas, the regulatory framework in Germany is not so straightforward. Project developers need to be aware of a number of issues where the legislation is changing or unclear.
For example, it remains controversial whether battery projects are privileged in outer zoning areas under German planning law (Außenbereich). These are non-urbanised areas without a development plan. In such areas, projects must be privileged in order to obtain a building permit (Section 35 (1) German Federal Building Code (BauGB)).
The exhaustive list of privileged projects does not mention battery storage. Whether these projects may be privileged because they serve the “public supply of electricity”, one of the items on this list, or because they are connected to a solar or wind energy system, is hotly debated. As a result, battery projects currently run the risk of not obtaining a building permit in the areas where they are most likely to be installed.
For grid-scale batteries with a nameplate capacity of 50 megawatts or more, there is the alternative option of going through a plan approval procedure (Planfeststellungsverfahren). This process is complex and lengthy.
A further complication: If thresholds for hazardous substances are exceeded and an incident could result in the release of these substances, the authorities may also require an additional permit procedure under environmental protection law.
In addition, battery projects are subject to mandatory notification under water law because they contain substances that are hazardous to water, such as lithium.
The good news is that at least a permit under the German Federal Immission Control Act (Bundesimmissionsschutzgesetz) or an environmental impact assessment (Umweltverträglichkeitsprüfung) is not required.
Grid operators must give priority to connecting solar and wind power plants to the grid. If batteries only store electricity from renewable energy sources, they also benefit from priority connection to the grid (Sections 3 no. 1 and 8 German Renewable Energy Act (EEG)).
However, this does not apply to batteries that are fed (even partially) with electricity from non-renewable sources – which is usually unavoidable for stand-alone projects. For these projects, there is still a right to grid connection, but it is not a right to priority (Section 17 German Energy Industry Act (EnWG)).
So much for the theory. In practice, grid connection in Germany is often massively delayed due to the slow pace of grid expansion and reinforcement.
Time will tell whether the recently enacted legislation on so-called “overbuilding” can remedy this situation. Since wind and solar power plants do not always use their grid connection to the full extent, it is now possible to connect more capacity than the connection point can transmit according to compatibility tests. To this end, grid operators can enter into flexible agreements with grid users.
It remains to be seen whether this will reduce delays, as the conclusion of such agreements seems to be at the discretion of the grid operators.
Currently, batteries are exempt from grid access fees for a period of 20 years after commissioning.
But this regulation only applies until 2029. It is unclear whether this exemption will continue for projects built after such date.
In Germany, grid connection customers must cover the costs of expanding the grid (so-called Baukostenzuschuss).
Renewable energy projects are currently exempt from this payment obligation (Section 17 German Renewable Energy Act (EEG)). The exemption also applies to batteries that store only renewable energy. For all other battery projects, it is highly controversial whether they must pay for grid construction costs.
Experts argue that all battery projects should be exempt because they stabilise the grid and neither consume nor generate energy but merely shift it on the time axis.
The Higher Regional Court of Düsseldorf has ruled that the current calculation method for grid construction cost is not adequate for battery projects. The case is pending before the German Federal Court of Justice, and a decision is expected towards the end of the year.
In the meantime, the German Federal Network Agency (Bundesnetzagentur), to the surprise of many, is undeterred and continues to require grid operators to charge battery projects for grid construction costs. This can be a significant barrier to investment.
Guarantees and warranties for batteries are important to developers. Battery degradation is inevitable but with a solid product warranty, developers can more confidently model their return on investment.
Product guarantees often cover the capacity, efficiency and availability of the storage system. Depending on the business model, guarantees may also be agreed on response time, ramp rate and control accuracy.
EPC contractors are often only willing to provide comprehensive warranties if they are appointed as the maintenance contractor for the project, so that they can ensure the fulfilment of such warranties.
In any case, project developers should inspect storage systems at the factory prior to shipment, and acceptance should only take place after comprehensive performance testing during commissioning.
The guarantor is also important. Sometimes guarantees sound promising on paper but are of little use in practice because only a financially weak subsidiary is liable, or a judgement is unlikely to be enforced in the guarantor’s country. In such scenarios, bonds and other collateral may help.
Project developers also need to be aware of supply chain risks. Investors are demanding proof that human rights standards have been respected in the mining of rare earths. Such commitments need to be included in the supply contracts.
Raw material prices and tariffs can unexpectedly increase project costs. Geopolitical tensions can delay the delivery. Price adjustment clauses, force majeure and compensation for delays are therefore important topics in supply contracts.
Storage systems with an installed net capacity of 104 megawatts or more (or 36 megawatts net installed capacity if the storage systems are prequalified to provide frequency containment reserve) are considered critical infrastructure.
Critical infrastructure means that the project owner – or the technical operator – must comply with a number of cybersecurity obligations. These include the implementation of certain IT security measures, the establishment of a contact point that can be reached at all times, the reporting of security-related incidents and regular demonstration of compliance with these obligations.
The German regulations on the protection of critical infrastructure are currently being revised in response to an EU directive. This will lead to a significant increase in the number of obligated parties. The new regulations are expected to come into force later this year.
The European Battery Regulation came into force on 18 February 2024, requiring manufacturers of industrial storage systems to progressively implement disposal and recycling requirements.
By the end of 2025, around 65% of the weight of lithium-ion batteries must be recyclable, rising to 70% by the end of 2030. From 18 August 2031, new industrial batteries must also contain a minimum amount of recycled material.
From 18 February 2027, an electronic battery passport will also be mandatory, providing information on the entire life cycle of the battery.