German battery energy storage: a key technology for grid integration?

The energy transition requires a fundamental restructuring of the energy supply system. This is particularly evident in the transformation of the electricity system: shifting away from centralized, fossil-based infrastructure towards a decentralized, renewable, and flexible energy supply.

This transition requires systematic changes at multiple levels. Electricity generation must meet increasing demand and, critically, supply networks need to be expanded. Transmission networks need to be upgraded to support long-distance transmission and more decentralized usage. Battery energy storage systems (BESS) can play a key role in this process: they help balance the fluctuating feed-in from renewable energy sources, reduce grid congestion, enhance supply security and, by participating in short-term day-ahead or intraday electricity markets, mitigate price spikes during periods of low photovoltaic and/or wind power generation.

BESS integration into the networks at all levels remains legally, technically, and economically challenging, however.

The legal obligation of grid operators to accommodate connection requests, under section 17, paragraph one of Germany’s Energy Industry Act (EnWG), is no longer the primary concern. Instead, the technical limitations – both for electricity feed-in and withdrawal – are becoming increasingly problematic. Despite legal requirements for network planning and clearly-defined grounds for connection refusal, practical uncertainties persist. While a blanket refusal based on grid capacity bottlenecks is generally inadmissible, it provides little relief to grid-connection applicants if the grid, or the grid connection point, lacks sufficient capacity. The absence of binding deadlines, inconsistent criteria for capacity allocation, and unclear regulations regarding so called “construction cost subsidies” (baukostenzuschüsse, or BKZ) all act as barriers to investment.

Flexible grid connections

A promising approach for facilitating the grid integration of BESS is offered by section 17, paragraph 2b of the EnWG, which for the first time legally secures flexible grid connection models. The distinction between static, dynamic, and fully dynamic output limitations allow for greater technical flexibility. Section 8a of Germany’s Renewable Energy Act (EEG) governs flexible grid connection agreements for EEG installations and energy storage facilities at the same grid connection point. These agreements enable the overbuilding of grid capacity and joint operation of multiple installations, via “cable pooling,” directly addressing a central challenge of the energy transition: grid connection bottlenecks. Such agreements can be especially valuable in regions with limited grid capacity by helping to accelerate and reduce the cost of connecting storage systems – provided that the grid operator and the participant agree on practicable and technically robust terms. The storage operator must ensure that electricity entry and exit to the grid remain within agreed limits.

The BESS industry has welcomed this development, hoping for more location options; faster grid connections; and more flexible, cost-effective integration. Grid operators will also benefit as these models enable better coordination of connection requests. This benefits BESS in several ways: First, it improves access to economically viable locations, even where grid capacity is constrained. Second, this supports new hybrid business models.

However, the regulatory framework remains underdeveloped and clearly needs improvement. Clear procedural guidance is lacking, creating legal uncertainty. Whether flexible models will prevail on a broad scale depends on bilateral agreements. Moreover, it remains unclear how the Federal Network Agency will exercise its discretion under section 17, paragraph seven of the EnWG. In addition, there are no binding guidelines for non-discriminatory capacity allocation in congested regions – such as whether a “first come, first served” principle should apply, or how failed reservation requests should be handled – reflecting similar ambiguity to the ongoing interpretation and application of the German Power Plant Network Access Ordinance (KraftNAV), in the context of BESS projects.

Construction cost subsidies

The BKZ continue to pose a financial burden on storage operators and remains a persistent issue in grid connection. The root cause lies in classifying battery storage systems as electricity end-consumers. The Federal Network Agency previously considered the levying of BKZ as entirely permissible, without sufficiently acknowledging the grid-serving functions of BESS when feeding electricity into the grid. However, the Higher Regional Court of Düsseldorf, in its decision of Dec. 20, 2023 (3 Kart 183/23), rejected this blanket classification, stating that it ignores the dual functionality of battery storage. Nevertheless, in its position paper of Nov. 20, 2024, the agency reaffirmed its previous practice of treating BESS as end-users when storing energy, which means that BKZ can be claimed in full by grid operators. This leads to significant cost burdens, especially for distribution-grid-connected projects, and discourages investment across regions. Although the performance-based pricing model for BKZ has been slightly adjusted – using a five-year average to smooth out price peaks – no structural relief has been provided. New discount schemes of up to 80% apply only in certain transmission-grid areas, likely creating distorted investment incentives to the detriment of distribution grid development.

Additionally, the relation to the KraftNAV remains unclear: although section eight, paragraph three of the KraftNAV exempts generation plants from BKZ, it is unclear whether, and under what circumstances storage facilities qualify for this exemption – especially regarding the 100 MW threshold and its application to an entire plant or individual energy storage blocks. Electricity network operators tend to charge a reservation fee because of the grid use for, offtake energy storage.

Outlook

BESS are essential for grid stability, electricity supply security, and the integration of renewable energy. Despite recent progress, significant uncertainties remain: There is still a lack of standardized national procedures, binding deadlines for grid connection requests, and legally transparent BKZ regulations. The inconsistent application of BKZ leads to financial risk and creates perverse incentives for site selection – storage systems are built where BKZ costs are lowest, not where the grid needs them most. The German Federal Court of Justice (BGH) has not yet issued a ruling on this matter, leaving a legal vacuum. It is evident that economically viable, legally secure solutions must balance the legitimate interest of both investors and grid operators.

A coherent and storage-friendly legal framework is therefore essential to scaling up storage development. Binding deadlines and transparent criteria for grid connection procedures, especially in capacity-constrained areas, are just as necessary as a legally enforceable and grid-oriented reform of the BKZ.

While the current coalition government agreement between the CDU, CSU, and SPD acknowledges the role of energy storage in a system-oriented energy transition, it falls short of delivering a regulatory breakthrough. Storage is discussed across the eight pages devoted to “climate and energy” in the coalition agreement but without a dedicated section or coherent legislative agenda. Key terms like “system benefit” or “grid-beneficial” remain undefined and the language lacks legal and conceptual clarity.

Without clear definitions or measurable criteria, these terms remain politically appealing but legally hollow. The reaffirmation of storage as being of “overriding public interest” and the promise to reduce multiple burdens (taxes, levies, fees) merely reiterate existing provisions, such as section 11c of the EnWG, without clarifying whether these apply beyond electricity storage. Similarly, referring to storage as a “large consumer” (Abnehmer) of electricity risks pre-empting unresolved legal questions – particularly the classification of BESS as consumers, a key issue in the ongoing BKZ proceedings before the BGH.

That highest German court in civil proceedings has set May 27, 2025, as a date for the oral hearing. Although the agreement pledges investment security and easier use of curtailed electricity, missing permitting reforms continue to block implementation. Privileges for storage appear limited to projects linked to already-privileged renewable energy installations, especially solar and wind sites. This coupling risks limiting flexibility where grid needs and generation potential don’t align. Storage linked to solar energy is framed as “system-beneficial” yet this adds further ambiguity, as PV plants already have clear grid connection rights and privileges under section eight of the EEG.

The coalition government sets the right tone but offers too little substance. Without legal clarity, enforceable rules, and concrete reform, the expansion of storage will remain stuck in regulatory limbo. What’s needed is not recognition but action.

About the authors: Boris Scholtka is a partner at Addleshaw Goddard (Germany) LLP in Berlin, and heads the German energy law practice.

Franziska Rothe is a managing associate at Addleshaw Goddard (Germany) LLP in Hamburg, specializing in energy and regulatory law.

Marija L. Krstanović is an associate at Addleshaw Goddard (Germany) LLP, specializing in energy and regulatory law.