In a short study by EWI as part of the ENSURE project, reform options for incentive regulation are discussed in order to reduce various incentive distortions in power grid operation. To this end, the short study first provides an overview of incentive-distorting mechanisms in the Incentive Regulation Ordinance (ARegV). Options for adjustment are then discussed.
The current regulatory framework in Germany creates distorted incentives that favor traditional grid expansion measures over innovative operating measures. These distortions arise because capital costs are financially more advantageous than operating costs in the regulatory framework, which makes capital-intensive measures appear more attractive. As a result, conventional solutions are often preferred, even though innovative measures could be more efficient from a systemic perspective. In addition, capital-intensive measures can improve the efficiency value of grid operators, while innovative solutions such as the digitalization of the grid often do not influence this value. One option to reduce distortions would be to adjust the comparison parameters in the efficiency comparison to take into account the network capacity increases resulting from innovative measures. Other options include the introduction of a digitalization budget or a more fundamental change in the regulatory regime towards cost-based regulation, which promotes timely investments but could affect the efficiency of grid management.
