50Hertz to invest €8.7 billion in grid capacity

German TSO 50Hertz has announced plans to invest €8.7 billion ($9.3 billion) in grid capacity, including overhead power lines, land and sea cables and substations to accommodate the continuing influx of renewable energy sources coming online.

The grid capacity investment will be made over the period 2023 to 2027 and is being touted by the Elia Group-owned TSO as more than twice the amount invested in the past five-year period.

“We will secure this increase in the long term. More than half of the volume is external financing, primarily via the capital market, but also via other instruments,” explained Marco Nix, 50Hertz CFO.

These instruments include a €600 million ($641 million) green loan provided by seven banks through the German state-owned investment and development bank KfW, which acquired 20% of 50Hertz in 2018 on behalf of the German government.

Added Nix: “We are entering an increasingly difficult capital market environment. Sufficient earning power is essential for maintaining the ability to finance and the partial financing of investments. Regulatory adjustments to the return on equity are therefore absolutely necessary.”

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Grid capacity for oncoming renewables

Overall, there was an increase in renewable energy systems in the 50Hertz grid area last year in the amount of 2,500MW, of which more than 1,800MW were photovoltaic and 700MW were onshore wind power.

In total, more than 40,000MW of renewable energy has now been installed in eastern Germany and Hamburg.

“We are seeing a clear upward trend in photovoltaics and expect that the connection to the grid of large free-standing systems and the boom in private roof systems will result in further expansion this year and in the years to come,” said Stefan Kapferer, CEO of 50Hertz.

50Hertz is currently building or strengthening overhead lines and underground cables over a length of around 250km and has put more than 600km of lines into operation, which have been confirmed in the Energy Line Expansion Act (EnLAG) and the Federal Requirements Plan Act (BBPlG).

“But it’s very clear: Just like the expansion of renewables, the grid expansion must progress faster in order to eliminate grid bottlenecks and reduce the costs for bottleneck management,” said Stefan Kapferer.

“Simplifications in the approval procedures are an important first step, but the personnel and technical equipment of the responsible authorities, especially at municipal and state level, must also be improved.”

1,700 line kilometres are currently in the approval process at 50Hertz. In addition, 50Hertz will strengthen the entire grid infrastructure to be able to absorb more renewable energy from the connected distribution grids and to keep the grid stable.

This includes the installation of phase shifters to control current flows and reactive power compensation systems to maintain voltage in numerous substations.