'Astonishing that grids are not ready': top BayWa executive says networks now critical concern

The level of difficulty that a developer expects to face in obtaining a grid connection or avoiding future curtailments is moving to the top of concerns when considering where to locate their renewable energy investments, according one of Germany’s leading green power players.

José Andres Visquert, global head of grid with Munich-headquartered Baywa r.e. is worried that the world may have underestimated the challenges of moving away from a system based on generating large scale dispatchable power from fossil fuels.

The International Energy Agency (IEA) warned last year that European grid investments would have to be doubled through 2030 and grid capacity by 2050 in order to meet net zero targets.

“Doubling grid capacity means doing a lot of things at same time," Visquert said. "It means incorporating the renewables we have into outdated grids that are not fit for purpose, while also getting DNOs and TSOs to invest in expansion.

“Network companies were not prepared for this. We are seeing more and more delays in relation to the grid connection commitments made by DNOs (District Network Operators) and TSOs (Transmission System Operators). We are seeing these connections being pushed further and further forward."

He acknowledged that DNO and TSO entities share the same supply chain issues as the developers, while also facing the thorny task of dealing with planning consents and permitting.

“These are things we need to address because I would say that grid are increasingly on a critical path,” he said.

From a corporate point of view, Visquert made it clear that Baywa r.e. has elevated grid issues to a top criterion underpinning its investment decisions, and this goes beyond the basic commitments made by countries to what is likely to happen in practice.

Curtailments are crucial

In such a scenario, curtailment forecasts are becoming a pivotal part of the investment decision.

“Curtailment is one of the consequences of not having a fit for purpose grid… we all know the duck curve when there is not enough grid capacity to export everything, but I have seen curtailment in Spain at 7am when the sun is rising, or in the last hours of the day as well."

He said Baywa r.e has started an assessment of the curtailments at a European level.

"We want our analysis to be based on all the information that is available from the utilities. We want to see all the curtailment that we have had in recent years, along with grid planning and expansion plans in each country," said Visquert.

To this end he said Baywa r.e. is working closely with a consultancy company to assess the effective curtailment that the company has faced in 2022 and 2023 and intends to project curtailment forecasts through 2030.

"Curtailments may be a technical issue, but I'm afraid to say that it's an investment decision. It could impact on your project finance, it could impact on a project transaction. It's a technical issue, but it has a much bigger implications on the economics and finance side.

"We need forecasts that will make sure that investments are bankable," he said.

The sensitivity of investments to grid issues can be seen in different forms, he added, citing the difficulties posed by distance-graded transmission charges introduced in the UK decades ago to encourage the construction of power stations in densely populated regions of England.

Today, with the growth of renewable energy, most of the wind development in the UK is taking place in Scotland or off the coast of Scotland, where existing transmission network fees can be discriminatory.

“If you are trying to connect a substation in the north in Scotland, the transmission network fee could end your project before you get to a final investment decision," Visquert notes.

German challenge

The topic is a critical one in Germany, where Europe's largest industrial sector is dependent on the success of an ambitious pivot toward renewables, announced when Russia’s invasion of Ukraine led to a decision to halt imports of piped natural gas from that country.

The German government had underlined this can-do stance last year by boosting its 2030 offshore wind target to 30GW and moving forward some grid connection dates as part of this push.

In its offshore wind tenders, Germany has included entitlement to grid connection among the terms on offer to successful bidders.

German backtracking is part of a much wider trend in Europe.

Recent research by London-headquartered energy think tank Ember found that grid investment plans in 11 out of 26 European countries point to a wind and solar deployment that will fall far short of levels required by national targets.

The estimated shortfall in grid capacity in those 11 countries totalled 27GW each for wind and solar, leading the Ember report's authors to warn about a risk of higher than expected energy costs for consumers.

Too many DNOs

In Germany, the existence of around 800 DNOs introduces an element of complexity not present in markets such as Spain, Italy and the UK, where there are a handful of DNOs and fewer TSOs.

"It can be a shock to land in Germany and find you have almost 800 DNOs. Our experience is that grid connection are not harmonised as often you are dealing with very small DNOs where you tend to find managers with multiple responsibilities," Visquert states.

He is more upbeat about Poland, where the company has had some problems in the past.

“We are seeing a shift with a new government that is more committed to renewable deployment. Two years ago the story was completely different. We actually, we got a couple of reconnection rejections after even being granted" he said.

"Grid planning and grid strategy in Poland have become more favorable for our projects, but we remain cautious and hopeful that this will get consolidated in the next two years."

The diagnosis is most positive for France, which Visquert jokingly describes as "a relative paradise" for grid connections when it comes to infrastructure deployment, attributing the more streamlined process to the fact that there is a single DNO representing 88% of the distribution network there.

Although connections there are largely at DNO distribution level he describes the high level of standardisation there as "one of the good things we are seeing in France that needs to be replicated in other in other countries".

He also notes also that the “Ministry of Energy in close collaboration with the DNO and TSO are implementing mechanisms to reduce the administrative permitting process”.

Visquert describes a moderate increase in grid connection times in France, but "short of the nine or ten years we have in in the Netherlands or in the UK".

The Netherlands, along with Finland, Denmark, and Croatia, was in fact one of the European nations singled out in the Ember report where transmission system operators blueprints for 2030 exceed renewables deployment targets significantly.

"The Netherlands is an example of a country that has identified the problem and is trying to tackle it with a combination of grid management, network flexibility and investment plans, Visquert said.

Visquert said he welcomed the fact that more European countries are exploring use of UK-style flexible connections that expose applicants to an element of risk until the grid is ready.

Other interim solutions we would like to see incorporated into standard business practices include dynamic line rating tools to allowing calculation of available capacity based on weather conditions as well as the energy storage solutions that are already an increasingly common choice among developers.

"Until grids are upgraded, we also think TSOs and utilities need to look at how to facilitate grid connections through things such as point to point overhead lines allowing developers to use their own synergies to reach a substation more efficiently," he added.

Such practices can make curtailments more manageable but, even with the latest tools, the current situation is spurring utilities to dedicate a growing portion of their own investments to grids.

In just one example of this, Germany's EnBW's investment 2024-2030 investment plan earmarked 60% of a planned gross investment of €40bn ($43m) for the expansion of grids, compared with approximately 30% for wind farms, solar parks and "climate-friendly, hydrogen-ready power plants".