Microgeneration in Germany (Part 1) – exploring how a decentralized energy system is already well established

On the one hand, it seems reasonable to produce energy from renewable sources where there is a lot of wind or sun, i.e. in a few selected locations. However, centralized production comes with a few drawbacks, such as the need for massive expansion of the electricity grid. Alternatively, electricity can also be generated where it is consumed, i.e. in the immediate vicinity of the consumer. Studies (e.g. by the German Energy Agency – dena) have shown that active and low-transaction-cost market integration of decentralized generation plants can increase market efficiency, reduce carbon emissions through optimized use of renewable energies and contribute to energy security in Germany.

There are many ways for homeowners or asset managers in Germany to participate in decentralized energy generation, for example: solar energy systems (especially rooftop PV systems), heat pumps, battery storage and EV charging stations. All of these systems can basically be categorized as decentralized energy generation systems. Under German law, there are multiple regimes that facilitate, incentivize and regulate decentralized generation. Decentralized energy generation systems also benefit from an exemption of electricity grid fees for the power used to generate or store or to receive fees for decentralized feed-in of power.

Yet, the EU and German market idea is based on interconnected energy networks (power, gas, regional district heating and in the future hydrogen) and this means even decentralized generated energy needs to be integrated into the systems. Crucial to the successful integration of decentralized energy generation is the digitization of the market players. This results in a significant increase in the amount of data to be processed in market communication. At the same time, the coordination and control effort for market and grid integration is increasing. Smart meter gateways play a key role in this digital market communication. In February, the Bundesrat (Federal Council) voted in favor of an amendment to the law that is intended to ensure a faster smart meter rollout.

Another legislative initiative in connection with decentralized energy generation is establishing a legal framework for so-called Energy Sharing. This concept originates from the EU Directive and has yet to be implemented into German law. To date, there is already the possibility for landlords, property owners or third parties to provide the electricity produced by the building's own solar panels to tenants, flat owners or co-owners, but only without using the electricity grid. In the future, a change to the EnWG is intended to enable households in shared residential and commercial units to generate and consume electricity from jointly used PV systems, including by using the public electricity grid. This regulation is supposed to simplify access to the energy transition for consumers who do not own their own space for solar installations.

Microgeneration is well advanced in Germany, but it is undergoing constant change. The success of such projects is largely determined by whether all legal requirements are met, the ideal business model is found by using all funding and support available and future developments are anticipated and planned for.

Authored by Katharina Rath and Dr. Florian-Alexander Wesche.