Up to 95% of renewable energy generation facilities in Germany are connected to the distribution network, especially concentrated in rural power grids. Taking EWE, an important energy supplier in the northwest region of Germany, as an example, in 2023, the proportion of renewable energy in the northern rural power grid managed by EWE will exceed 100%. In many areas, the return power of wind and photovoltaic energy has exceeded the local average load by ten times as early as ten years ago, while its average annual power abandonment rate is only 3%. This article will systematically analyze the challenges, innovations, and future development paths faced by the German distribution network in terms of planning, operation, and market rules, in order to provide inspiration for the construction of China's distribution network.
01challenge
In northern Germany, wind power is the main source of electricity, and many distribution networks have approached, reached, or even exceeded 100% renewable energy supply. The main challenges include controlling the cost of expanding the distribution network, addressing the demand for rescheduling caused by network congestion, and retrofitting the low-voltage distribution network based on adjustable distribution transformers.
1. Expansion of distribution network
The average annual power outage time of EWE's rural distribution network is maintained at around 3 to 4 minutes, which is at the leading level in Germany and has been repeatedly used as an evaluation benchmark by the German Federal Network Supervision Agency. This achievement is due to its high cabling rate. Currently, its distribution network has achieved 100% cabling and is equipped with a highly automated dispatch system. In Germany, internet fees are set based on efficient costs and obtain regulatory approval in advance in the form of a revenue cap. Although power outages are not directly charged per minute, they indirectly affect the overall revenue of grid operators through "quality factors". According to EWE's annual reports over the years, the distribution network has received the highest level of 4% reward almost every year. The return on investment in its distribution network (including the expansion of renewable energy consumption) accounts for a very high proportion of the overall revenue, approximately equivalent to 5 to 6 times the regulatory annual rate of return.
Generally speaking, feedback power is a typical convergence problem. In medium voltage distribution networks, the return power mainly causes overcurrent risks at high-voltage transformers; In high-voltage distribution networks, the focus is on ultra-high voltage transformers, which can easily lead to overcurrent and voltage deviation problems. According to the statistics of the German Federal Network Supervision Agency, the direct abandonment measures taken by the German transmission grid account for only about 30% of the total amount of abandoned electricity in the country, which means that most of the abandoned electricity actually occurs at the distribution network level. However, as ultra-high voltage transformers belong to the transmission grid, most of the compensation for abandoned power is also borne by the transmission grid, unless it involves system safety issues.
Due to the fact that the ultra-high voltage direct current transmission line connecting the north and south of Germany has not been built yet, it is difficult for offshore wind power in the north to effectively deliver to the southern load center. This structural bottleneck causes frequent congestion in the transmission network and prominent problems of line overload. To cope with this limitation, the transmission grid is forced to adopt a "re scheduling" measure, achieving system balance between abandoning wind power in the north and using gas-fired power plants in the south through "one rise and one fall". Among them, wind power curtailment is mainly based on offshore wind power in the north, supplemented by wind power curtailment at the distribution network level.
After years of construction, most distribution networks have basically acquired the ability to be "observable, measurable, adjustable, and controllable". On this basis, the distribution network gradually has the ability to optimize power abandonment, and some areas have even achieved "fully automatic power abandonment control". However, there are still a series of key challenges at present, including complex issues such as "rescheduling 2.0", customer churn, and "dynamic internet fees".
2. Rescheduling 2.0
Starting from 2022, the German distribution network will be officially included in the "rescheduling" system, and all renewable energy facilities with installed capacity exceeding 100 kilowatts will be required to participate in the newly implemented "rescheduling 2.0" measures. This measure explicitly requires that in the event of power abandonment, the distribution network must also achieve system balance.
During the implementation of 'Rescheduling 2.0', the distribution network dispatch needs to conduct power flow forecasting 48 hours in advance and optimize the power abandonment plan accordingly. The implementation of system balance relies on the flexible adjustment ability of power generation and load, as well as the trading mechanism of the spot market.
However, the distribution network faces many challenges in implementing "Rescheduling 2.0": firstly, the accuracy of renewable energy prediction for medium voltage nodes is limited by insufficient statistical characteristics, making it difficult to achieve the expected level; The second issue is that the accuracy of external equivalent power grid modeling is still insufficient, and it needs to be addressed by further improving the interaction of power grid prediction models; The third limitation is the limited flexibility between the power generation side and the load side. These factors collectively constrain the efficient implementation of 'Rescheduling 2.0'.
According to the grid connection standard "Technical Access Regulations" issued by the German Institute of Electrical Engineers (VDE), the EWE distribution network requires all distributed generation and energy storage equipment with an installed capacity of 100 kilowatts or more to provide dynamic reactive power support according to the reactive voltage characteristic curve (Q (U)) or fixed power factor (cos φ). This type of equipment needs to transmit the set and actual values of reactive power through a remote monitoring system to achieve stable control of local voltage and reactive power - this mechanism has become a key prerequisite for reducing external reactive power procurement. Thanks to this, the self reactive power compensation cost of EWE distribution network has been significantly reduced, and only one set of reactive power compensation devices can meet the overall demand.
According to the information released by EWE Distribution Network, since the implementation of "Rescheduling 2.0", the collaborative rescheduling volume with upstream power grid companies has decreased by about 15%, and the overall rescheduling cost of the system has also decreased accordingly. At the same time, the number of grid dispatch interventions triggered by power abandonment has surged nearly a hundred times in the past decade, reflecting a significant increase in the response speed and regulatory flexibility of the distribution network in dealing with renewable energy fluctuations.
3. Adjustable power grid transformer
The low-voltage distribution network mainly faces the problem of exceeding the limit caused by the increase of terminal voltage due to photovoltaics. Practice has proven that using adjustable grid transformers is the most ideal measure both economically and technically.
Since 2015, EWE distribution network has integrated nearly 300 adjustable distribution transformers into its system. In areas with frequent voltage fluctuations, this type of transformer has become a standard configuration. The demonstration phase runs stably without any obvious technical problems. The project objective of achieving centralized voltage regulation of medium voltage power grids through coordinated control of adjustable distribution transformers has been fully achieved. Practice has shown that in many scenarios, the coordinated operation of multiple adjustable transformers can effectively replace or delay the expansion of traditional power grids, while significantly improving the access capacity of renewable energy.
The EWE distribution network currently has approximately 20000 distribution transformers and has initiated a continuous renovation plan by setting mandatory adjustable transformer configuration requirements for new and replacement equipment. The plan also includes promoting the full integration of distribution transformers into digital dispatch systems (planned to be completed before 2027), and conducting pilot projects for centralized voltage control. EWE plans to increase the proportion of adjustable transformers to nearly 100% by 2035. This will become one of the key measures to enhance the distribution network's ability to cope with a high proportion of renewable energy and achieve corporate climate neutrality goals.
innovate
The innovation of the German distribution network is mainly focused on large-scale research projects funded by the government, with the most prominent areas being peak shaving planning and flexible markets for distributed renewable energy. The former belongs to the regulatory category, while the latter belongs to the market mechanism. The two complement each other and work together to promote the efficient and flexible operation of the distribution network.
1. Peak shaving planning
In traditional power grid planning, grid capacity is usually designed based on peak current. According to Germany's early renewable energy regulations, the power grid must receive every kilowatt hour of renewable energy generated, which means that the distribution network needs to be planned and expanded according to the peak level of new energy generation. From a cost perspective, this not only increases the investment pressure on power grid enterprises, but may also push up electricity prices, thereby increasing the burden on residents and industrial users - because network fees are an important component of electricity prices.
To address this challenge, EWE was the first to propose the concept of "5% real-time peak shaving". According to this principle, reducing the power generation of distributed renewable energy by about 5% can increase the accessible capacity of the distribution network to more than twice its original capacity. Its core lies in the fact that distributed new energy operates close to the load side, making peak power generation more easily absorbed by local loads, thereby significantly reducing the actual required peak shaving electricity.
Ultimately, the power grid planning strategy provided an institutionalized solution to this problem. Without the need to replace equipment or increase investment, reserving only 3% of peak shaving space during grid capacity planning can significantly reduce the cost of expanding the network. The results of a funding project by the German Federal Ministry of Economic Affairs indicate that in optimal scenarios, investments in most distribution networks can be reduced by nearly half, especially for medium voltage distribution networks. Thanks to the long-term technological exploration and policy promotion in the industry, the German government revised the Energy Law in 2017 and officially introduced the "3% peak shaving" planning principle, allowing for a certain amount of controllable reduction in power grid planning to avoid resource waste. The core of this regulation is that for peak shaving capacity not exceeding 3%, power grid companies do not need to provide economic compensation, thereby indirectly reducing the electricity price burden on end users.
2. Distributed Renewable Energy Flexibility Market
Germany's exploration of the flexibility market for distributed renewable energy is moving from early "concept verification" to a growth period driven by regulations and supported by platforms. Practical experience has shown that only by synchronously solving the four major bottlenecks of smart meter popularization, data standardization, process simplification, and regulatory mechanisms, can the market truly play its value in alleviating distribution network congestion and enhancing the consumption of renewable energy.
Taking the joint pilot of EWE - European Spot Market Platform as an example: During on-site testing, biomass gas and wind turbines actively reduced their output based on real-time price signals. At the same time, an electric natural gas compressor and a hybrid energy storage device from Friesland Farrell were activated to absorb excess electricity. Unlike traditional mandatory transmission restrictions, flexible resources can spontaneously respond based on price, and test results have confirmed that this mode can effectively alleviate local congestion and improve the access capability of distributed energy.
The pilot also exposed two major challenges:
1. High supplier costs - Potential suppliers of battery energy storage and adjustable loads believe that their opportunity costs (such as production interruptions) have not been fully compensated for
2. Regulatory uncertainty - baseline accounting, price formation, and local market regulatory rules are yet to be clarified, and strategic "issuance reduction" arbitrage risks need to be prevented
Exploring the above pain points is progressing along two paths: firstly, Germany plans to incorporate distributed flexible resources into a unified market clearing process under the framework of "Rescheduling 3.0". Secondly, the European spot market platform is piloting "local flexible trading" in other countries to verify regional clearing mechanisms. The current supply of high-quality resources is still insufficient, but with the continuous decline in battery prices, this structural bottleneck is expected to gradually ease, laying the foundation for the maturity of the flexible market.
Future Path
In the future, the German distribution network will face two main tasks: firstly, to incorporate a large number of household photovoltaics, batteries, and heat pumps into the scheduling and market mechanisms of the distribution network, in order to reduce negative electricity prices and enhance the consumption capacity of renewable energy; The second is to implement a dynamic network fee mechanism and enhance the guidance and guidance of unified market prices on distribution network congestion.
1. Rescheduling 3.0
In order to better absorb renewable energy and reduce negative electricity prices, Germany is preparing to introduce the "Rescheduling 3.0" mechanism. That is to say, incorporating household photovoltaics, batteries, heat pumps, and electric vehicles into distribution network scheduling and market mechanisms.
The research results indicate that electric vehicles connected to households can reduce system costs by up to 70% when adopting flexible charging strategies. To further unleash the potential of distributed flexibility, the existing cost based "rescheduling 2.0" mechanism will be expanded into a market-oriented rescheduling mechanism that covers distributed flexibility resources. These dispersed and small-scale flexible resources will be integrated by aggregators and provided uniformly to grid operators for use. The system clears resources through a unified prioritized list and selects the most suitable resources to participate in grid congestion management. Large power generation facilities are still compensated based on cost, while demand side flexibility is rewarded through market mechanisms. This hybrid model is expected to promote efficient access and coordinated operation of new flexible resources, laying the foundation for achieving a more resilient power system.
The first pilot projects currently underway in Germany have proven in practice that decentralized and small-scale flexible resources have the full technical capability to participate in grid congestion management. The project participants also pointed out in the summary that user comfort was maintained throughout the entire process and was not significantly affected. The pilot projects currently underway will be tested on a larger scale to determine which user side capacities have adjustability and transferability under high load conditions in the power grid.
The EWE distribution network is preparing for the integration of micro flexible resources with power below 100 kilowatts, and plans to launch the first round of on-site testing in its own power grid area starting from 2024. This is one of the key steps for EWE to promote the integration of distributed flexible resources under the framework of the "Rescheduling 3.0" joint project, aiming to explore the feasibility of micro resources participating in grid regulation and congestion management in actual operation.
EWE's virtual power plant platform supports equipment operators to integrate their power generation capabilities, including rescheduling services, into a unified system and participate in electricity market transactions. The platform has achieved technical integration with the "Rescheduling 2.0" system, and EWE has also provided relevant services to its electricity sales customers. Meanwhile, distributed energy sources such as photovoltaics can be directly sold through this platform. This operating model provides a solid technical foundation for the market-oriented utilization of micro flexible resources and lays the conditions for their widespread access under the "Rescheduling 3.0" framework.
2. Dynamic internet fees
The unified electricity price adopted by Europe and Germany in the spot market has the advantage of allowing for more trading combinations, making the market very active. But as a prerequisite, the power grid capacity is insufficient, so spot trading is affected by power grid congestion. The node electricity price can take into account the impact of grid congestion, but the flexibility under nodes is often insufficient, which affects the profits of market participants and leads to a less active market.
In order to take into account the impact of grid congestion and the high burden of grid fees in regions with a high proportion of renewable energy, the German government has launched a nationwide grid cost sharing mechanism and piloted peak shaving electricity subsidies and auction mechanisms in the northern region.
Prior to this, there were usually two billing methods for internet fees: tiered pricing based on electricity consumption or adopting a maximum power contract system. According to the new regulations, peak shaving electricity can receive a fixed grid subsidy of 40 euros/megawatt hour, which is applicable to load resources such as electric to heat conversion, large heat pumps, and batteries integrated through virtual power plants, but the subsidized electricity cannot be traded in the market. The government plans to shift the subsidy allocation method to an auction system starting from October 2026.
This mechanism essentially introduces the efficiency advantage of "node electricity pricing" within the unified electricity pricing system. At the same time, it also avoids the institutional rigidity of node electricity prices, gradually moving the peak shaving rules that originally belonged to the regulatory field towards marketization. It is estimated that this measure can reduce the cost of rescheduling renewable energy by about 600 million euros.
The EWE distribution network is one of the main participants in this pilot project. To support implementation, the EWE distribution network needs to undergo significant modifications to its information and billing system to support the management and settlement of dynamic network fees, resulting in multiple delays in the pilot launch.
Overall, the first round of pilot projects had poor results, mainly due to technical, organizational, and regulatory barriers, resulting in limited effectiveness. With the comprehensive promotion of smart meters, the construction of standardized platforms, and the continuous optimization of processes, the second phase pilot plan will be launched in April 2025. Only by timely resolving the above bottlenecks can the dynamic network fee mechanism truly play a role in alleviating distribution network congestion and integrating distributed flexible resources.
In summary, the German distribution network has shifted from "passive expansion" to "intelligent scheduling" in the process of integrating a high proportion of renewable energy into the grid, but technological iteration does not represent the end point of the transformation. Looking ahead, regulatory authorities need to continuously reduce the total system cost through dynamic internet fees and flexible rescheduling mechanisms. At the market level, the flexibility market for distributed renewable energy should be gradually improved based on household photovoltaics, battery energy storage, and heat pumps.
