Transmission system operators (TSOs) in Germany are subject to extensive regulatory
requirements, which are primarily governed by the Energy Industry Act (EnWG) and the
subordinate ordinances and specifications of the Federal Network Agency (BNetzA).
Key supervisory instruments relate to network access, tariff structure and the cost
efficiency of operators.
General regulatory requirements for TSOs
- TSOs must grant third parties non-discriminatory access to the network.
- They are subject to cost reviews and approval of their network usage fees by the Federal Network
Agency.
- There are requirements regarding capital costs, efficiency targets and incentive regulation to keep
investment and operating costs at an economically optimal level.
- The regulatory system is continuously adapted to new requirements using special determination
procedures such as the current procedures for TSOs.
- The return on equity currently set by the Federal Network Agency for network operators is 5.07% for
new installations and 3.51% for existing installations (both before taxes). These rates apply to the fourth
regulatory period (electricity 2024–2028, gas 2023–2027).
- The Federal Court of Justice recently ruled that the above interest rates were determined by the
Federal Network Agency in accordance with the law.
The AgNes determination procedurey
The AgNes determination procedure (“Allgemeine Netzentgeltsystematik Strom” – General Electricity Network Tariff
System) is a reform process initiated by the Federal Network Agency in May 2025. The background to this is the
expiry of the current Electricity Grid Tariff Ordinance (Sections 12-20 of the Electricity Grid Tariff Ordinance (Strom-
NEV)) on 1 January 2029 due to legal and technical changes, in particular requirements under European law (ECJ
decided that regulators must be independent and be able to create their own rules not coming from parliament
or the ministry) and the requirements of the energy transition.
Objectives and key points of AgNes
- The previous methodology for determining grid
tariffs will be fundamentally revised.
- The main focus is on sustainable, efficient and fair
cost allocation in the electricity grid in view of rising
investments, flexibility requirements and decentralised
feed-in providers.
- The participation of feed-in providers (e.g. from renewable
energies) in grid costs is being discussed in
order to distribute levies and surcharges more fairly
and to control the burden on end consumers.
- AgNes addresses the predictability of investments,
reduction of complexity and adaptation to the
increasingly digital energy world.
- The Federal Network Agency is presenting discussion
papers on this topic, holding expert workshops
and intends to publish a final decision by the end of
2026, which will apply from 2029.
Consequences and practical implications
- The grid fees for transmission system operators and
all other grid operators could undergo significant
structural and methodological changes.
- Among other things, it is conceivable that feeders
(such as operators of renewable generation plants)
will also be required to contribute more to grid costs
in future, which could have an impact on electricity
prices and subsidy systems.
- The investment required for grid expansion and
digitalisation must be refinanced as efficiently as
possible through the new tariff systems.
- For electricity suppliers, industry and end consumers,
this will result in new calculation bases and
possible changes in cost burdens or relief.
- The Federal Network Agency is obliged to ensure
that the system is legally compliant, as regulation
based solely on ordinances is no longer permissible
under European law.
The German transmission grid is attractive to investors
for several reasons
- Regulated minimum return and secure revenues
The transmission grid is a natural monopoly whose
revenues are not determined by market prices but
by the Federal Network Agency through regulated
grid fees and a calculated return on equity
(currently 5.07% for new installations, with a slight
upward trend for new investments). This provides
planning security and reduces market risks.
- Long-term and stable investment prospects
The energy transition requires enormous investment
(over EUR 300 billion by 2045 for the transmission
grid alone), as the expansion and modernisation of
the electricity grids are essential for the integration
of renewable energies and security of supply. This
results in continuous growth and investment opportunities.
- Government support and low default risk
Relevant investments are supported by government
supervision and (partial) financial participation,
which greatly reduces the risk of payment defaults
or investment losses. Rating agencies also view
government participation positively, as it reduces
refinancing costs for grid operators.
- Natural monopoly and low competition
The transmission grid has high barriers to entry;
there is no competition, and grid fee regulation
guarantees reliable revenue streams and minimises
competitive risk.
- Climate policy tailwind
Grid expansion is politically desired and supported
in the long term by subsidy programmes and regulatory
adjustments. The energy transition and the
switch to renewable energies thus ensure investment
demand and political acceptance.
- Potential increase in return on equity
There are discussions about raising the regulatory
return on equity to a more market-oriented level in
order to further mobilise private capital and thus
open up greater scope for investment.
In summary, (institutional) investors benefit from an attractively
regulated environment with political support,
stable revenues and predictable, long-term investments.
Despite relatively low interest rates, high security
and rising investment and financing requirements
are key incentives for long-term capital investments in
the German transmission grid.
Conclusion
TSOs are subject to comprehensive network regulation requirements, in particular with regard to cost and revenue
determination and efficiency. AgNes heralds a radical overhaul of the grid tariff system, which will fundamentally
change German electricity grid tariffs from 2029 onwards. The central objective is to adapt the regulatory system
to the new technical, economic and legal requirements of the energy transition and to ensure fair and sustainable
financing of the grid infrastructure. Therefore, the German transmission grid is and remains attractive for institutional
investors.
