CJEU judgement on customer installations in accordance with Section 3 No. 24a Law on the Energy Industry EnWG

Briefing

What is the legal background to the decision?

When operating electricity and gas grids, German law distinguishes between (unregulated) customer systems (Section 3 No. 24a and b EnWG) and (partially or fully) regulated electricity and gas grids. The operation of a customer system is significantly less costly than grid operation and is also economically more attractive.

According to Section 3 No. 16 EnWG, customer systems are not part of the energy supply grid and the operators of such systems are accordingly exempt from the grid operator obligations. In contrast, regulatory requirements apply to grid operation, grid fees must be calculated and charged (along with grid-related levies and charges) and grid operation requires authorisation from the energy supervisory authority.

What did the CJEU decide?

The subject of the dispute was the connection of two residential areas with 96 and 160 residential units respectively and CHP plants connected to them, as so-called customer plants, to the local electricity grid.

In its ruling of 28 November 2024 (preliminary ruling procedure), the CJEU ruled that there is no model in European law for the customer installation provision created in Germany in accordance with Section 3 No. 24a EnWG. The German regulation is therefore contrary to European law because it provides for additional exemptions from the obligations of a network operator over and above those provided for by the Internal Electricity Market Directive.

The Federal Court of Justice is expected to rule in May 2025 and there will be virtually no room for argument following the CJEU judgement (no grandfathering for old cases). It seems rather unlikely that Section 3 No. 24a EnWG will even be retroactively declared to be contrary to European law (and thus grid fees, levies and charges will have to be charged retroactively).

Who is affected by the decision and what does it mean for those affected?

Many companies are likely to be affected, especially those that have previously relied on decentralised energy solutions. This can include:

neighbourhood developers in the real estate sector,
distribution systems (campus concepts)

in shopping centres,
universities,
research institutions,
hospitals and clinics, rehabilitation centres, nursing homes (especially with third-party use such as outsourced canteen, laundry)

wind or PV farm operator

In all these cases, it is questionable whether the customer system is still compliant and the following steps are therefore typically required:

Appraisal of the status quo to identify the problem
Determination of the need for adaptation to develop a legally secure and economically viable supply concept (if necessary, grid operation by third parties)
Communication with the authorities in relation to the Federal Network Agency and, if applicable, the energy regulator (in particular as soon as the Federal Court of Justice has ruled in May 2025)