Grid Connection Boom: Can Austria's DSOs Keep Up? – Panel Discussion

Thank you Christian. So Boris provided a wonderful segue there, he managed to pre-empt half my questions for the panel, but that's a good problem to have. Yes indeed batteries around the world are exploding into power markets, fastest growing technology in the power sector according to the International Energy Agency. Another technology to be exploding onto the scene in recent years is of course AI AI and its attendant need for data centres. We've had flatlining, stable, even falling power demand in recent years, and suddenly grid operators are faced with a surge in connection requests. So to join me on the stage to talk about what this all means from an Austrian perspective, I'm going to call up Alexander Schultmeier. Alex is General Counsel at Black Vault Energy, a developer and operator of utility scale battery storage. He has a background in covering finance and batteries in particular. Also, can I invite back to the stage Zenja Tolstrup, director at Magnus Energy, and of course Christoph Ziertner, who heads consulting at Indekomp. Thank you all. Hello. So Alex, perhaps I'll start with you. Could you paint us a picture of the scale of the challenge? I mean, we see in Germany a massive, we saw that already a couple of years ago, this pipeline of batteries coming. What does the picture look like for Austria in terms of the pipeline of battery projects, and how does it compare to the country's supply-demand balance? Okay. So Boris, I'm going to pick up on your slides because you were super helpful. At Back Vault, we're definitely trying to be one of the major IPPs and developing best and bringing them live. It's a challenge. We heard, I think, the three major ones, it's permitting, but I think compared overall, it's the least of our problems because we are super, I mean, we know what we're doing. We have a good team. Grid connection is a big issue. I mean, perfect to the DSO topic. And also the regulations, of course, which are probably not as beneficial or advantageous as, for example, we heard Romania, Bulgaria. I mean, they bring a project in five months to the ground. I think it's not possible in Austria, at least at the moment. We're trying to get there with all we can. But yeah, I mean, these are the challenges. And you try as an IPP to work around them and give everything you have to get the projects there. And I think we saw the biggest one is 140 or something like this. I mean, we have already won. I mean, you saw the news. We've won finance and coming online soon, which is like 1836 megawatt hours. There are more to follow. So we have a large pipeline and it will follow. But I mean, another point is also probably the financing part, which we are also privy at and know what we're doing. But there's a large environment coming or you need to actually bring a BESS facility to Austria and make it work. So it's not that easy. But we are getting there. But it's not as the same as in Germany. They had loose regulations, different. We are thinking and I think in Austria, we are thinking it from the back instead of the front and making it a bit or much more harder than it probably needs to be. So Boris, I think, referred there on stage to a pipeline of about 24 gigawatts for Austria. Is this what you also see in terms of application requests? And how much of that do you think is actually going to be built? Yeah, I mean, I can't speak for the DSOs mainly and also TSOs, obviously. But I mean, we know that it's also like built into the Renewable Expansion Acceleration Act that we need five gigawatts of BESS capacity until I think 2030. And there are studies showing that it should be nine gigawatts until 2040. Given the slide that we showed before, look, I mean, we had a first come, first serve system. So everyone just booked and tried to reserve their capacity. We now shifted to a first ready, first come system, which is probably more up to the reality and dividing like actual and project that we'll more likely realize. In the end, I can only speak and that's just an assumption. I have probably every 10th project or so or like every fifth, something like this will actually come live. But it depends. And for, I mean, lower Austria, which is like, I think the biggest number, there are also data standards like eating up a lot of capacity because they have like two, 300, 400 megawatts on 24-7 demand, which makes it a bit difficult for BESS and other ones. But we can touch upon that also later. Well, yeah, well, I'd like to come back to first come, first serve in a moment. But maybe, Xenia, I'll bring you in here to talk about the law. So I understand Austria introduced, a new energy law at the end of last year. What does this have to say about encouraging flexibility in particular? And do you think it's fit for purpose? I think we were almost, I have to say, lucky that we were so late with our energy law, because in this way, we already managed to account for a lot of the regulatory impulse that was given on the EU level. So we managed to implement or transpose that into national law faster than others, just because we were so late with our national legislation. I'm not sure if that makes sense, but that's how it feels. What that means is that a lot of the things that the latest edition of the electricity regulation asked for already in our law. And for example, what is very relevant for batteries in this sense is flexible connection agreements. They have been introduced at the end of 2024. And now increasingly different member states are rolling them out. And they are now also anchored in the LWG. Something that batteries can both make use of to create, to get a faster, to have a faster connection. But at the same time, we still need to hash out a lot of the details. And as usual, the devil is in the details. So we'll see about that. But fundamentally, if I understood it correctly, right now it is on ad hoc basis. So we don't have standardized rules for those connection agreements. And this is quite important for a battery business case, because if I do not know for how many hours of the year I will be redispatched or so I will be curtailed, restricted, for how much, what are those envelopes are going to be, how is this going to affect my business case, when would I get a permanent connection. All those questions need to be answered somehow. And as long as it's done on ad hoc basis, that doesn't really help the business case. And then I also got, I looked at the latest consultation as well, run by eControl beginning of the year, that talked about two other cases that I thought were interesting for batteries. One is grid-friendly tariffs. So you can get reduced or exempted from network use tariff if you are, but there you have to fulfill like a whole list of, I mean, you know what I'm talking about. So a whole list of different prerequisites. So for example, reactive powering requirements, being available for any type of redispatch, being in the right location, because this can be only granted to you after the network study that tells you, okay, this is a good location. So there are a lot of, a lot of hoops that battery storage still needs to jump through before getting that type of preferential treatment. Or there is also the, the discussion about the contracted capacity auction based, but once again, we don't yet have enough details in that. So I would have to say on the positive side that in the, in the regulation, there's already been a huge progress compared to what we had before, where we, there's been a very strong preferential treatment of, of hydro storage, which is no longer the case, but it has not become that much easier. And this is why I applaud your courage. Thanks. So maybe Christoph, I'll bring you in here on the topic of first come first served. It's Austria is not the only country wrestling with this. Many others in Europe are dealing with this issue. But is anybody else doing it better than Austria? I mean, looking at Eastern Europe, which Boris named as an example, where battery storage development is going faster, they are the most of these countries are auctioning their grid capacities. So I'm not so sure if first ready or auctioning is better, but I think both is better than first come first serve, especially with like, being able to do these applications without any kind of penalties or security. So it feels like a bit like the gold rush in California, like back in the days where a lot of people think it's so easy to make a lot of money, you just need like some capital, you need some applications, a bit of land, and then you're going to print money with the batteries. And with this attitude, you're going to block a lot of these projects. I think earlier you asked like, what we believe, like how much of these 24 gigawatts are going to be built in the end, I think the question is until when? I mean, Austria is usually slow in these things. And I don't know if we have the time to be that slow. I also think there in some point there is going to be a contradiction, like if you're still going to continue subsidizing PV, but you're not allowing or not creating the right framework for battery storage, then it's all being lost money. And I mean, in Austria now, it seems like there is a bit of a discussion going on, like, are we going to get rid of the grid fees for these best systems? Or are we going to start subsidizing them? I mean, I personally would be more a fan of like getting rid of the best fees. I mean, I also think like this approach of like getting them, like freeing them from the grid fees for 20 years is like unnecessary. I think like most of them would be happy. And please, Alex, comment on this one, if it would be for five or 10 years, because like better to have the certainty for five or 10 years than not being able to get like the 20 years, let's say it like this. Germany has grandfathered it, right? From from 2028, that exemption will no longer apply. Is that something you suggest? But on the other hand, just to play devil's advocate a little bit, isn't it perhaps also there's something valuable in going a bit more cautiously and slowly with respect to these things? I mean, Austria already is in a sense a giant battery for Europe. It's got all of this hydropower. I mean, I might be speaking at an unfortunate time with this drought, ongoing drought, but isn't there a risk of destroying your country's main sort of source of clean generation, the business case for it? If you expedite growth of an alternative form of storage, do we really need that much battery capacity in Austria? Yeah. 100%. 100%. Why? Aren't they in competition? Of course they're in competition. What is bad about competition? Well, first of all, I don't think our hydro will go anywhere, except if it evaporates in another heat wave. But generally, it's not going to go anywhere. And I think looking at it purely from a competition perspective would also not be helpful. Because as I was mentioning also to you in a bilateral discussion, there are also more innovative approaches to that, where, for example, there have been hybrid projects with battery hybridized with hydro, which I think is great. Because in the end, hydro is a beautiful technology, but it's not extremely fast. And so especially to cover those ramps that batteries are great at covering, but they're not very good at duration, could be a very nice symbiotic solution. And I know that there have been a couple of companies that are implementing this solution. So I think that could also be important to look at. And fundamentally, I do strongly believe that diversification of different sources of both supply, but also flexibility is beneficial for any country out there, particularly given our history, as I showed in my presentation, of large import volumes. We do need to have a bit more of an own buffer. I'm not arguing that it should be all batteries, but I think batteries do have an important role to play under certain, let's say, safeguards. Alex, what's the inhibiting? Sorry, just to add to that one. I think the answer is much easier. As long as we are having 300 to 400 hours per year with negative prices, obviously, we need more storage than we have. I mean, it's basically all a sign that we have an excess of renewables, which means we need more storage capacity. That I would strongly argue against, by the way. Why? You want to have the incentive for electrification? No, no, no, no, no. I'm just not saying that if battery... I have been publishing these flexibility misconceptions, and that's one of the big ones. So, my point is that if you suddenly add a lot of batteries, it does not tell you that you're going to get rid of negative prices. You might flatten those peaks that you particularly see at sunset and sunrise that has been shown in a lot of data, but you're not going to get rid from the negative prices altogether. Why? Because as long as the subsidies on renewables and other technologies exist, it might still be beneficial for some technologies. And secondly, I also try to push against the arguments that it is renewables that are creative negative prices. Excuse me, but it's also about other technologies that are inflexible and would actually prefer to pay to keep running. That also create negative prices. So, there I would really strongly disagree for that. Sorry. Fair enough. So, Alex, I was going to ask you, what's impeding the co-location of batteries and hydropower projects from your point of view? Maybe to add on on Xenia's topic. So, obviously, I agree 100%. We need batteries. But personally, and because I'm a bike global, I really mean it. And I mean, you showed it and also like, I forgot the name, but before, we saw like the last two years, a dip in hydro, right? It's getting lower, which also means we have lower storages. And what we also do, and again, we should be super thankful in Austria for our renewables. And it's still like two thirds. It's amazing, because otherwise we would be, yeah, have a bigger problem. But what we need to understand is that the hydro is mainly located in the Western Austria and the Ops. So, and we still need a lot of power in the East. And it still doesn't make economic sense to transfer everything stored from the West to the East. And batteries would bring us more locally, possibly a little storage. So, I think, even from that perspective, it totally makes sense to have batteries. And we are in competition with hydro, but probably not always at any times. It's different. It's a different system. And maybe what you said, I think you agree, we still believe that hydro is somewhere favored in the regulation. So, yeah. Strongly favored. But it has improved substantially, wouldn't you say, with the new Elvok? Let's see. Okay. Okay, the jury is still out. Yeah, let's see and wait. So, I mean, that's my point on batteries. So, I think they can coexist with hydro. But I think we need it. And we also, I mean, to be fair, we want more renewables, right? We want more PV. We want more wind. Someone has to back it up. And it can't be hydro all the way along. It needs to be batteries, because we can put it there where it doesn't have to be co-located. But it's just locally centralized. It makes more sense. I hear that batteries, more batteries aren't necessarily more grid servicing or grid-friendly behavior. Zenya, why is that? It seems counterintuitive to me. It does sound counterintuitive at first, before you start looking into the actual bidding strategies. And actually, this brings me to the, I will get to this. But the main point I wanted to make is that actually getting a grid connection is not the end of the story. It's just the start of it. It can be a very difficult start, but it is just the start of it. And in the end, you need to look at the bigger picture, as I was suggesting also for Austria, right? It is about what kind of trading strategy this battery has, how it is managing its constraints, which markets it is participating in, and how it is affected, for example, by tariffs and taxes. And there, I agree with you that we do have some provisions. Yeah. Anyway, the point is that if, for example, as a battery operator, I see that my revenues in the balancing markets are very low, because there's been a strong cannibalization effect through the integration of balancing energy markets, then I will try to trade in the day ahead and intraday. And I know for a fact that right now, it's a fairly common strategy for batteries. So they've been really pivoting to short term electricity markets. What does that, what that happens is that then a battery only sees a wholesale zonal price signal that is, has nothing to do with the actual grid situation. And as I told you before, Austria does suffer from a huge amount of congestion. It's not as bad as in Germany, but it's pretty bad for a country of this size. And this is where then a battery, not really caring about where it is located and how exactly it is operating, can create a real problem. Or like in Germany, you can have a situation where all the batteries can create very strong simultaneity effects, which then creates a whole new problem, which is reactive power. And this is why now the, the LVG also is saying that if you want to have that reduced tariff, then you have to have reactive power capabilities to avoid exactly that. So too many batteries acting at the same time can also be actually fairly dangerous for the system. Exactly the opposite of what you want to create. This sounds horrendously complex than if you're a regulator. I mean, it sounds complex to me. If you're a regulator and you're trying to encourage battery adoption, but you want it in the right places, how do you go about doing that sensibly then? I mean, I'm, I'm, I'm thinking here from a German perspective, I'm thinking the North South divide, but Austria has a similar East West divide, understand. So how do you go about promoting batteries in a market fashion with little state intervention at the same time, getting them where the state wants them? Christoph, jump on that grenade. I mean, I'm not sure if it's the best approach, but I would love the grid operator to basically decide on which connection points he wants to have the batteries. You basically just say, I want to have X megawatt at this connection point, that traffic station. And then you basically auction the, the, the capacity. I mean, there could be problems with like having the land and the grid at the same time then. So this is a complexity. I'm, I don't want to touch now, but I mean, I think it is, it, I think there is some kind of central planning needed, needed. And this is basically not enough central planning, but I see in Austria. I mean, this batteries can be a problem if you do not decide where they should be built. Now imagine like we are in the noon hours. We have a lot of PV in the Burgenland and then like there was a battery in, in Tyrell basically trying to inject better, more power where we already are congested in the middle of Austria. So some spatial distribution should be centralized or centrally planned in somehow. I think there, the, what we've been talking for quite a while already, but it never got, and not just in, in, in Austria, but in Europe overall, um, is that we need to have some sort of locational signals. Yeah. You hear that very often, but nobody can really tell you what those locational signals are supposed to be. My personal opinion would be that the very first and important step, and I believe it's been already been taken on the EU level and should really be applauded is availability of information. That has massively improved over time. And, uh, since the, uh, the, the grid action plan, I keep mixing the years, but it's been fairly recent, um, TSOs and DSOs must, must publish their capacity maps. So this is already a big step forward for exactly project developers to get more visibility is into the areas where it would be meaningful also from the grid perspective to install something new. Of course, it doesn't solve the problem of what you already have. Like if you already have really bad congestion, that it doesn't really help it. But at least for the new ones, you can manage that at least through the access to information is the first very important step. I know that different TSOs and DSOs have been, uh, faster or slower on that, but it's been going from that perspective in the right direction, I would say. And, and where do you see then, what does this say about the future of, of batteries and their purpose in, especially in Austria? Is it going to be with grid scale, uh, batteries that, that service the system service, the grids needs, or do we see households looking at their electricity bills soaring and, and defecting from the grid, getting their own household batteries, and these being then aggregated by service providers and, um, perhaps avoiding the whole need for, for a lot of grid in the first place. Are these two things intention or, uh, yeah, where do you see the future lying? It's fine. Yeah. Um, I don't think they, they exclude each other, uh, but we also have to be realistic about household batteries. I mean, we, we saw the picture and I think most of the, the capacity installed is now household or residential batteries. Yes, that's true. Um, but we also heard that's mainly because it's subsidized and now with another, uh, funding round, like subsidy, subsidy rounds is you have to have, you only get best, like a small, a best, um, when, when you have PV and so on. So it's combined, it makes sense. But first of all, um, no one tells me as a natural person how to gear that because I'm, I mean, I think we all agree that we would aim at our own, like optimization of consumption. So I don't think that any of us has really in mind optimizing the grid. So this would speak against grids, like system serving system friendly, however you call it. Um, secondly, um, I think, um, grid scale or utility scale and large scale, what we do standalone, you need, you, you build like one, two, three of those, um, facilities and you basically have like 10, 100,000 of, of utility households, sorry, household batteries. So, I mean, it's much more easy to scale for us than, than on a, on a, on a, on a single level. I think for, I mentioned the five gigawatts and nine gigawatts, and if maybe it's even more, um, depending on the hydro, um, let's see, um, I think it's a combined effort. Um, but we shouldn't exclude best and make it harder than it needs to be, because I mean, everyone I talked so far in the last three years, everyone agrees we need best. I mean, please raise your hand if you don't agree we need best. So I can see it. So that's why for, for, for us, it's a bit hard to understand why we, we, we don't make a combined effort to getting there. And, um, I understand you have different ways of looking at it, but which is needed. That was, oh yeah, sorry. I just, uh, lost my last question. I had a, you, you took me off on a different, uh, train of thought. Um, but, uh, in terms of reducing the need for, for networks, uh, I mean, Boris had it on his slide that this was the expectation that, uh, uh, uh, best will, will reduce, uh, grid build. Um, is this turning out not to be the reality that we, that we still need it at the same time? Oh, make it brief. Um, I, I, I think it can, um, and it will, um, depending on, on how best are geared and, and what they're doing and not, I mean, we have also to be fair, not every best system will be geared super system friendly. It's impossible, but on a main level, and that's what, uh, the regulation also does. It kind of tries to, to foster that idea. And that's, I think that's fine for, for every best operator up to a certain level. Um, but I do think that best can, to a certain extent reduce, um, or at least, um, slow down the need for grid expansion, which in the end is much, much, much, much, much, much, much cheaper than grid expansions and much faster. Because I think, I'm not sure who said it, but, um, you said it, building a cable just takes a lot of time. Yeah. And building a best is much faster. It's just pure reality. Sure, but it's still, I would say, that's, uh, it's not, it's hardly comparable. I would not say that one is cheaper than the other. I would actually, no, I wouldn't say that. And also that, I would say that storage can act in a system friendly way, unless it, uh, as long as it is steered in this direction. If it's not, then no, it won't. Sorry, it really won't. Why? Because in the end, a project developer, market party wants to make money, which is normal. You're a for-profit company. Why would you care about the grid as long as it's just a given? The point to be aware of is that very soon, and it's already been reality in other countries, and now it is reality slowly here, it will not be given any longer. And this is something that really needs to kind of trickle into our brain, and we need to get to become aware of that much more. It's not a given, and we need to know how to use the scarce resource better. Okay, I'm getting the signal now that I have to wrap up. But if I could ask one last question, because I think it might be interesting. I mean, we've seen, uh, from examples in, uh, California and, uh, in Australia more recently as well, uh, a huge rise in batteries that are able to push more solar into evening hours, and that's eroded gas, gas consumption. Do you see this also happening in Europe, in a place like Austria, or are the, the nature of Northwestern Europe, its climate, uh, and the role of gas in the power sector, is it all too different here? And we're not going to really see these kinds of, uh, sudden drops in gas demand, uh, replicated. I think it's going to happen in Austria, even if batteries would not be built in Austria, because we are in this interconnected market. So all the batteries who are being built around Austria are also going to reduce the gas-fired power production in Austria as well. So, um, it's happening. It doesn't matter what we are doing. The question is who's profiting, and like, what other kind of, um, apart from reducing gas-fired power production, what other kind of benefits, like less risk expansion or whatsoever, I do want to have, and like, how I'm going to manage this. Yeah, I would agree with that. In particular, that in the end, we have not seen that in, in, in Austria or elsewhere in Europe, I would argue, because we're just not there in terms of the magnitude. I mean, Australia is massive, and the batteries that they built there, like I remember that first 100 megawatt, uh, project by Elon Musk somewhere in the, in the, in the desert. South Australia. Uh, exactly, which was already so massive for those years, and now they're, it is not comparable. Once we get to anywhere close to those degrees of magnitude, I'm pretty sure those will flatten, and I fully, uh, fully agree with you that it's going to be much more, uh, regional or cross-zonal. Then on that relatively positive note, I take away from that, that even if only a fraction of this pipeline does get developed, then maybe we won't need quite as much natural gas in the years ahead as is assumed. Thank you very much to our panelists. I will now pass it on to our hosts. And thank you, Nadine, and, uh, the caption. Alexander and, uh, Christoph. Thank you. Another one. And also for you. Oh, yeah, yeah, yeah, for sure. Thank you. Very good. We, uh, thanks the panel, and, uh, it was a very, very good, uh, round there. Uh,