Reforming the German energy sector


The new Digitisation of the Energy Turnaround Act (Gesetz zur Digitalisierung der Energiewende) was published into German Federal Law on 2 September 2016. The new law will finally get the long awaited smart meter rollout and connected infrastructure in Germany going, defining future roles and tasks for all market participants.

Despite its ambitious name, the new law mainly covers smart metering, not everything connected with digitisation in the energy sector. The Act contains a framework for the electricity sector to become one of the first fully digitised sectors in Germany’s economy. However, the name ‘Digitisation of the Energy Turnaround Act’ is overly broad and therefore somewhat misleading, as the bill only covers certain aspects of energy sector digitisation. It mainly deals with the installation and operation of smart metering systems in the distribution grid. More specifically, it aims to put in place certain technical preconditions and data protection rules, mainly contained in a new Metering Point Operating Act.

The new Act is originally based on the Third Internal Market Package, introduced by the EU as far back as 2009. The directives of this package require all EU member states to equip at least 80% of consumers with intelligent metering systems by 2020, subject to a positive national commercial assessment of the rollout. Contrary to other areas of energy policy (particularly for renewable energy), the German government has been wary of the costs associated with this task. It took a long time to put the first legislative proposal on the table, and an even longer time to agree on the new – but still limited – German smart metering regime.

Key objective

The key objective of the new law is to facilitate the implementation of smart meters and ‘smart meter gateways’.

The new law also introduces specific and detailed requirements, both for the design of the smart meter devices and for the transmission of data. The overall goal is to open the German energy market to digitisation, while ensuring a high standard regarding data protection and ICT security.

New roles, new regulations

The central part of the reform is the newly implemented Smart Meters Operation Act. In 77 sections, the new Act sets out new rules for the marketing and use of ‘smart meters’ and ‘smart meter gateways’.

The Smart Meters Operation Act introduces new regulated market roles, particularly the role of the ‘meter operator’, who is in charge of – and responsible for – the implementation, operation and maintenance of smart meters, and who has specific legal obligations in that role.

According to the new law, the responsibility connected with the rollout of the ‘meter operator’ initially rests on the energy supply grid operator. Using a special public procurement procedure, it can however transfer this position to a third-party service provider.

The Smart Meters Operation Act defines extensive technical requirements for the technologies involved, particularly regarding the reliability and security of energy measurement and the transmission of data. Compliance with the new rules is controlled and supervised by both the Federal Office for Information Security and the Federal Network Agency.

The new Act contains a staggered rollout plan for the installation of smart meters. The rollout will begin in 2017 and will continue until 2032. The process comprises different rollout periods for different types of end consumers and plant operators, depending on the amount of energy they use, or feed in. For some types of consumers and operators, the rollout will have to be finished before the end of 2024.

The Smart Meters Operation Act in principle requires operators to equip consumers above 6,000 kWh p.a. consumption, and plant operators with an installed capacity of more than 7 kW, with smart meters. Any consumption or generation below this threshold is optional. The introduction of smart meters is tied to compliance with a staggered price cap for annual costs.

In any event, the rollout will not begin before the manufacturers of the necessary devices can provide them. This requires certification by the Federal Office for Information Security.

Adapting to change

Meter operators, suppliers and service providers need to refine their business models to make the most of the new legal regime. The government did not see itself able to say how often meter operators would use the option to equip consumers up to 6,000 kW/h with new meters, considering the new price caps.

Since the entire field is strongly regulated, ensuring compliance with the legal regime is key for all market participants.

Energy supply grid operators

The operators of energy supply grids must make an important decision early on, probably at a very early stage of the implementation process: they must decide if, and to what extent, they want to use third party suppliers as part of their own smart metering infrastructure. The new law allows outsourcing of responsibilities and defines corresponding market roles, e.g. the role of the smart meter gateway administrator or the smart meter operator.

If the grid operator decides to install a third party as operator for the smart meters, this will be subject to public procurement rules.

Service providers and manufacturers

Enterprises that want to offer supporting services have a rather short period left to implement the new legal requirements. This applies particularly to enterprises designing, manufacturing and marketing the hardware devices which will be used as smart meters or smart meter gateways.

Telecommunications service providers

For telecommunications service providers planning to offer connectivity services for smart meters and smart grids, the key point is that the new law is technologically neutral. This means that, in principle, all types of communication technologies can be used to provide connectivity for the new smart meter infrastructure.

However, connectivity services still must comply with rather strict legal conditions in relation to their reliability and performance and transmission security.

Legal and regulatory updates

The Federal Ministry of Economics and Technology (BMWi) needed to create a legal framework for the use of smart meters, paying special attention to data protection and security by using the standards and technical guidelines created by the Federal Office for Information Security (BSI).

In view of a cost-benefit analysis by BMWi, smart meters should only be mandatory if they reduce costs; hence it was determined large consumers should be the first to use smart meters.

On the generation side BMWi does not want to change the threshold for installing smart measurement systems of a capacity of more than 7 kW for new renewable power plants and CHP plants. On the consumption side, final customers with a consumption of less than 6,000 kWh per year will not be obliged to install smart measurement systems in accordance with the EnWG. In the long run they will be offered inexpensive electronic meters that display consumption.

It was proposed that installation costs be regulated to make sure that the individual costs do not exceed the benefits. The installation will be financed by metering charges, not by a new surcharge. Cost limits will ensure the efficiency of the rollout.

Three ordinances will be presented:

• A measurement system ordinance, which contains the technical requirements, i.e. standards and technical guidelines for data protection and security and the interoperability; • A data communication ordinance, which regulates who is entitled to obtain which data from whom, how often and for what purpose;
• A rollout ordinance, which regulates who is obliged to install smart meters in the sense of the law and when they must do so.

Based on these key points, BMWi will prepare and present draft ordinances.


In an electricity system characterised by volatile electricity production it is increasingly necessary to connect networks, production and consumption efficiently and intelligently. There is a growing need for a demand and consumption oriented link between production and consumption. Information and communication technology plays a central role in this, to allow monitoring and optimisation of connected energy system components. The aim is to ensure energy supply based on an efficient and reliable system operation.

So far, German household consumers have mainly used electromechanical electricity meters. Traditional meters provide a very limited amount of transparency and cannot transfer electronic data or offer the possibility for automatic controlling and switching of devices. By contrast, smart meters consist of a digital meter and a communication unit: the smart meter gateway. This will allow data protection and data security compliant integration of smart meters into a smart network.

As Germany is traditionally concerned with data protection issues, a key requirement for the new Metering Point Operating Act is to ensure a sufficiently high level of data protection and data security. The current German Energy Industry Act already contains certain requirements for energy sector specific data protection, authorising the German Government to issue additional requirements.

The new Act on the Digitisation of the Energy Turnaround will comprehensively revise the legislative framework in this area. n

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