German power grids need higher earnings to fund energy transition, Amprion says (updated)

Elia SA

23/01/2025 16:08

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      Grid firm wants regulator to grant higher returns 
    

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      Says financing at risk due to low rates
    

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      27.5 billion euro invest may be impacted
    

  
 (Adds IG Metall from paragraph 13)
    By Vera Eckert and Tom Käckenhoff
       BERLIN, Jan 23 (Reuters) - Germany's power grid
operators will need the national regulator to raise the cap on
their returns on infrastructure spending when it sets new limits
in 2029 so they can fund grid expansion and attract investors,
the CEO of network company Amprion said on Thursday.
    Speaking to Reuters on the sidelines of the Handelsblatt
Energy Summit, CEO Christoph Mueller said Amprion, 25% owned by
utility RWE  RWEG.DE , wished for the regulatory agency to
consider its plea in decisions about the next five-year
regulatory period expected later this year.
    "The German equity interest rate for transmission grids
cannot keep up with international competition," he said.
    The regulatory agency, Bundesnetzagentur, currently allows
write-off rates of return on equity employed of 7% on new
infrastructure and 5% for existing infrastructure pre-tax. Those
compare to rates between 7% and 9% elsewhere in Europe,
according to analysts' reports.
    "If nothing changes, it will present us as a transmission
system operator with major challenges in financing the projects
of the coming years," he added.
    Amprion and three sector peers in Germany must operate
within the regulatory framework while planning billions of euros
of spending on power lines and equipment to help transport a
growing share of electricity from renewable sources, which
requires sophisticated hardware.
    They must reach wind and solar generation sites, and
transport their output, often via expensive underground cables,
that face less resistance from the public than overground lines.
    Amprion's 11,000 km grid in Germany is second in length
behind that of TenneT  IPO-TTH.AS , with the other two being
50Hertz  ELI.BR  and TransnetBW  EBKG.DE . 
    In a fee-model, spreading costs among power consumers, what
has been invested flows back to the grid operators via
depreciation over 40 years, and interest is paid on the capital
still tied up via the grid access fees, that are ultimately
financed by the end consumers.
    Amprion plans to invest 27.5 billion euros ($28.60
billion)in the current five-year period through 2028, for
example on platforms to connect offshore wind turbines and
cables from the North Sea to the industrial Ruhr region in
Germany's west.
    The grid operators fear the regulator might not set
satisfactory levels they want, due to its brief to keep grid
costs down for consumers, who share them as part of their power
bills.
    That scenario could worsen external funding conditions, and
endanger their financial ratings, Mueller said.
   German union IG Metall warned of exploding costs and spoke
out in favour of nationalizing and combining long-distance power
grids so the expansion of grids could be done by the state on
its own.
    "All of our sectors are telling us that grid fees are
increasingly becoming the main price driver for electricity,"
the union's deputy head Juergen Kerner, said in a statement. 
    Grid fees already account for around a quarter of
electricity costs, Kerner. "We cannot afford this additional
burden. Otherwise, the industrial transformation and the energy
transition will both be in danger."
    Asked about the idea of merging the grid operators,
Amprion's Mueller said: "All I can say about Deutsche Netz AG is
that a merger will certainly not speed up the energy
transition." 
    

    
($1 = 0.9614 euros)

 (Reporting by Vera Eckert and Tom Kaeckenhoff, editing by
Miranda Murray, Leon Kuegeler and Tomasz Janowski)
 ((vera.eckert@thomsonreuters.com; +49 30 2201 33654))