There’s growing discussion in Spain about including the costs of #congestion and #balancingservices in the calculation of #electricity #gridfees paid by customers.
The idea is that, since we have a problem with costs spiraling out of control (congestion costs alone could reach €2.5 billion in 2024), the proposal is to “sweep them under the rug of regulated costs.”
This solution is already applied to transmission tariffs in Germany, which in 2024 amount to a staggering €64.3/MWh, doubling the 2023 figure of €31.2/MWh. In 2023, tariffs were subsidized with €1 billion from the German Economic Stabilization Fund, and in 2024, this subsidy has been removed.
Transport tariffs in Germany include:
➡️ Depreciation, financial remuneration, and operation and maintenance costs of high-voltage grids (which are the only items included in Spain).
➡️ Losses.
➡️ Congestion.
➡️ Balancing services: FCR, aFRR, mFRR, …
Since industrial grid fees are heavily subsidized, the result is that, for example, a household in Berlin pays an average of €39.70 in fixed charges and a variable component of €111.1/MWh (compared to €89.3/MWh in 2023).
Do we want to apply this solution in Spain?
✅ Advantages:
Energy retailers would be able to pass on the cost of congestion and balancing services to customers without risk.
✅ Disadvantages:
1️⃣ The #electricity system would assume the risk of imbalances, which could lead to the return of the “infamous deficit.” (Why is it common for the electricity sector to propose measures that create deficits that then have to be paid for over decades?)
2️⃣ The costs of congestion and balancing services are seasonal and vary significantly depending on the time of day. Advanced #flexibility management and #storage systems allow for fairly reliable estimation day ahead and help avoid consumption during high-cost #energy hours (including all components), which benefits the system as a whole and incentivizes investment in behind-the-meter flexibility and storage. If these costs are included in tariffs, this optimization possibility disappears, as the calculation is done ex-ante on an annual basis.
3️⃣ By masking a cost as part of the tariff calculation base and shielding customers from its consequences, we would, in my view, be perpetuating the problem. The solution is to implement more measures to reduce the cost of congestion and frequency regulation: including many more assets by lowering the participation threshold to 100 kW to increase competition, regulating the independent aggregator to facilitate participation, and analyzing the implementation of ex-ante management systems to minimize redispatches.
In my opinion, copying the German system would be a huge mistake.
