On 15 July 2025, the German Federal Court of Justice (BGH) handed down a long-anticipated decision (case no. EnVR 1/24) confirming that distribution system operators (DSOs) may lawfully impose one-off construction cost charges – known as Baukostenzuschüsse (BKZ) – on battery energy storage systems (BESS), even when these systems are purely grid-based and do not consume electricity on-site. The Court found that this practice does not violate the non-discrimination principle under Section 17 (1) of the German Energy Industry Act (EnWG).
The ruling, which overrules a 2023 decision by the Higher Regional Court of Düsseldorf, represents a significant development in the regulatory treatment and economics of BESS in Germany.
Background
The case concerned a 1.7 MW / 3.45 MWh battery storage facility operated by Kyon Energy. The facility was to be connected to the local distribution grid without on-site consumption. The relevant DSO imposed a BKZ based on the performance-based pricing model (Leistungspreismodell) outlined in the 2009 position paper by the Federal Network Agency (BNetzA). Kyon Energy challenged the charge, arguing that such fees are discriminatory, especially in light of the EU's pro-storage provisions under the Electricity Market Directive (EU) 2019/944.
The BNetzA rejected the complaint in 2022, but its decision was overruled on appeal by the Higher Regional Court in December 2023. The BGH has now reinstated the BNetzA position.
What is a BKZ – and why does it matter?
A BKZ is a one-time payment required from entities connecting to the electricity grid. It is levied by grid operators to recover a portion of the grid expansion costs attributable to that connection, based on the maximum requested capacity (rather than the actual electricity consumption). BKZ differs from annual grid tariffs in that it is not usage-based, but rather a capacity-based entry fee designed to ensure cost causality and efficient grid planning.
Under the performance-based pricing model, the BKZ is typically calculated by multiplying the requested capacity by a performance-based price (averaged over five years), which can vary based on the voltage level, regional grid constraints, and site-specific factors. Although the underlying methodology dates back to 2009, it remains widely applied – often leading to significant upfront costs for developers.
Key takeaways from the BGH decision
1. BKZ for battery storage is not discriminatory
The Court concluded that charging a BKZ to BESS does not violate the non-discrimination principle under Section 17 (1) EnWG. Even though BESS units differ from traditional consumers in that they feed power back into the grid, the Court held that its withdrawal of power for charging purposes justifies a treatment similar to other end-users.
The Court also emphasised the steering and cost-reflective function of the BKZ, noting that it incentivises applicants to size their grid connection in line with realistic capacity needs. This logic applies equally to BESS, which can place a significant load on the grid during charging – regardless of their potential feed-in benefits.
2. No special privileges based on grid services
The ruling dismisses the argument that BESS should be exempted from BKZ due to their grid-stabilising characteristics. According to the BGH, only the local DSO is best placed to assess whether a specific BESS project provides measurable benefits to the local grid. As such, BESS operators cannot claim a general exemption from cost-sharing obligations.
3. Compliance with EU energy law
The Court also found no conflict with EU law – particularly the Electricity Market Directive (EU) 2019/944. While EU law promotes non-discriminatory access to the grid and recognises the role of energy storage, it does not prohibit connection fees, especially where such fees are part of a transparent and non-discriminatory framework.
4. DSOs retain discretion in BKZ calculation
The BGH reaffirmed that DSOs may continue using the performance-based model set out in the 2009 BNetzA position paper, provided the methodology remains transparent and applied consistently. Notably, the ruling confirms that BKZ charges already levied under this model remain valid and are not subject to reimbursement.
What the BGH did not decide
Application to large-scale storage (>100 MW)
The ruling did not consider whether storage units above 100 MW capacity, which fall under the Power Plant Grid Connection Ordinance (KraftNAV), should be treated differently. Under Section 8 (3) KraftNAV, installations may be exempt from BKZ in such cases.
Advance BKZ payments
The BGH did not address whether DSOs may demand substantial advance payments of BKZ before formal grid connection. Current law is not definitive on this point, but best practice suggests that payment should occur upon connection.
Scrutiny of individual DSO BKZ calculations
The Court assessed only on the legality of the model – not the fairness or accuracy of any specific grid operator's price calculations.
Implications for developers and investors
This decision is likely to sustain one of the major cost hurdles for storage developers in Germany. In some cases, particularly in regions with high grid congestion, BKZ can account for more than €100,000 per MW of connection capacity, representing a significant share of project CAPEX and a substantial upfront cost that can undermine the business case for BESS.
Importantly, the BGH decision clarified that BKZ is lawful, but not mandatory – DSOs may continue to charge it, but they are not obliged to do so in all cases. This leaves room for voluntary flexibility or negotiation.
Moreover, current BKZ practices remain one-sided: charges are based exclusively on withdrawal capacity, with no recognition of the grid-relieving effects of feed-in. Many industry stakeholders argue that this approach fails to reflect the full system value of BESS, particularly in light of Germany's broader decarbonisation goals.
Outlook
The BGH ruling confirms the legality – but not the inevitability – of construction cost charges for BESS under current German law. It remains to be seen how the BNetzA and grid operators will implement the ruling in practice. As things stand, developers must continue to factor in BKZ as a cost item and engage with DSOs early to explore potential flexibilities or exemptions.
Looking ahead, further legal reform may be needed to ensure a more balanced, future-proof framework that accounts for the dual role of energy storage – as both consumer and generator – in the evolving energy system
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
