By 2045, expanding Germany’s distribution systems could cost around 250 billion euros if grid operators continue to plan and build as they have in the past. But a study by Agora Energiewende suggests that around 66 billion euros could be saved if operators make better use of existing infrastructure and deploy flexibility where it is needed. Doing so will require them to advance their planning and operating processes.
Heat pumps, electric vehicles, battery storage systems and new industrial electricity consumers are changing the demands on distribution systems. At the same time, increasing numbers of solar and wind plants are feeding electricity into the lower-voltage levels of the grid. Grid operators must expand their infrastructure to accommodate both feed-in peaks and rising loads. But not every peak in demand requires a new power line or an additional transformer. Often, the grid needs to operate at full capacity for only a few hours a year.
A recent study by Agora Energiewende shows how better use of existing infrastructure and the targeted deployment of flexibility could make grid expansion more cost-effective. The potential savings amount to around 66 billion euros – more than a quarter of the total investment expected.
If the power grid continues to be planned and operated in the conventional way, grid expansion would require a total of 248 billion euros of investments by 2045. Under this scenario, the solution to preventing overloads would be to reinforce or add power lines, transformers, transformer stations and secondary substations.
Initially, most of the investment would go toward expanding the high-voltage grid. From 2035 onward, the need for expansion would rise significantly, particularly at the medium-voltage level. By 2045, investment at this level would total 113.4 billion euros, making it the largest cost component in the distribution system, followed by the low-voltage level at 74.3 billion euros.
At the same time, the drivers of grid expansion are changing. At the medium-voltage level, the expansion of renewable energy capacity is initially the main source of additional demand. As electrification progresses, however, rising electricity demand between 2035 and 2045 will overtake generation as the dominant driver of expansion. At the low-voltage level, demand is already the decisive factor. Heat pumps, electric vehicles and other new consumers are increasing the load. Grid operators therefore need to work on adapting their networks to rising electricity consumption, rather than focusing on the feed-in of renewable energy alone.
To reduce the cost of grid expansion – and, in turn, the grid charges paid by consumers – the Agora study outlines several approaches, whose effects vary over time. Some measures merely defer the need for expansion, but in doing so they buy time.
On the generation side, dynamic peak shaving is an effective tool for reducing rare feed-in peaks from solar and wind plants, thereby lowering the need for grid expansion at all voltage levels. Overbuilding is an approach that installs more capacity at a single connection than the grid can accommodate at peak times. Feed-in peaks can then be capped through curtailment. Multiple plants sharing a grid connection can also reduce feed-in peaks. This approach, which is referred to as co-location, describes the installation of battery storage systems directly alongside wind or solar farms. These battery storage systems can store excess electricity and feed it into the grid later, allowing existing connection capacity to be used more efficiently.
In the long term, targeted load management offers the greatest potential for cost savings. As electricity demand rises, flexibility on the consumption side becomes increasingly important. Electric vehicles, heat pumps and battery storage systems can shift their electricity use to different times. If managed strategically, this can ease pressure on the grid during critical hours. The aim is not to reduce consumption across the board, but to adapt it to prevailing grid conditions.
Dynamic grid charges can incentivize consumers to use electricity when sufficient grid capacity is available. For these price signals to work, they must reflect actual bottlenecks and be coordinated appropriately across the different voltage levels. In some cases, grid-serving battery storage systems can relieve local bottlenecks and delay or eliminate the need for grid expansion.
To make better use of existing capacity and deploy flexibility where it is needed, grid operators need to understand the state of their networks as accurately as possible. At the medium- and low-voltage levels in particular, they often lack information about how heavily individual power lines or transformers are actually being used. Digital grid monitoring, advanced metering infrastructure and more accurate forecasts can provide greater transparency. Load peaks can then be detected earlier, available capacity reserves assessed more accurately and existing equipment can be operated closer to its actual performance limits. All of that contributes to more efficient grid usage, reducing the need for costly expansion.
Based on these findings, the Agora Energiewende study calls for the further development of the established NOVA planning principle (“Netzoptimierung vor Verstärkung vor Ausbau” – grid optimization before reinforcement before expansion). In the NOXVA principle, the X stands for flexibility. New power lines and plants should no longer be the only response to the growing burden on distribution systems. The study identifies dynamic peak shaving, overbuilding grid connections and targeted load control as particularly effective tools. For these solutions to become an integral part of grid planning and operation, however, an appropriate regulatory framework is needed. The German government and the Federal Network Agency would need to create incentives that encourage more efficient use of existing grid infrastructure and systematically incorporate flexibility.