Making the market for reactive power more efficient: Study sees potential for relief in grid charges

The market-based procurement of reactive power in Germany has so far fallen well short of its potential. This is the result of the joint study by Alterric and the consulting firm E-Bridge Consulting "Economic Potentials of Market-Based Procurement of Reactive Power". According to the report, the market is currently fragmented, not very standardised and non-transparent, which has a direct impact on efficiency and costs in the electricity system.

Reactive power is central to voltage maintenance in the grid. With § 12h EnWG, the legislator already set the course for market procurement of this system service in 2020. In practice, however, the market is still young: tenders have only been carried out gradually in individual grid regions since 2025. However, the evaluation of these tenders that have been issued so far shows structural deficits. More than half remained without a surcharge. Price caps vary greatly, and key information such as call-off quantities is missing.

If the existing potential of decentralised systems is not exploited, grid operators will have to invest more in their own, usually more expensive, offsetting systems. Since these investment costs are regularly passed on to electricity prices via grid charges, an efficient market provides direct relief for grid costs for industry and private households.

"We see that the market basically works, but is far from exhausting its potential today," says Dr. Frank May, CEO of Alterric. "If we tighten up here, we can make better use of existing plants and noticeably reduce costs in the electricity system – including grid charges."

The study shows that a lack of standardization and low transparency in particular make it difficult for providers to participate. Short lead times, inconsistent tender designs and low planning reliability limit investments and competition. As a result, existing technical potential remains untapped, for example in the additional reactive power supply from existing wind farms.

Dr. Henrik Schwaeppe, Head of Studies at E-Bridge Consulting: "The market for reactive power is still in the early stages of its development. Initial results should therefore not be interpreted prematurely as a measure of its long-term potential."

The study identifies 11 concrete measures to increase the efficiency of the reactive power market. Four of them can be implemented at short notice and without regulatory adjustments:

• standard contracts across network operators,
• Central publication of tenders,
• Expected call-off quantities in tenders
• as well as transparent publication of tender results, e.g. as part of a monitoring report of the BNetzA.

Other measures are aimed at greater investment security and better predictability, for example through longer tender periods or full remuneration for the maintenance service.

It is becoming increasingly clear that renewable producers are now able to reliably provide systemically relevant services. Plants such as wind farms can provide reactive power with comparatively little additional effort and thus ensure the stability of the electricity system, which is critical for the industrial site.

Alterric is already bringing these capabilities to bear in practice: Since April 2025, the company has been supplying reactive power from a portfolio of wind farms and complementary technology and is participating in corresponding tenders. The experience gained from operations was incorporated into the study.

The complete study "Economic Potentials of Market-Based Procurement of Reactive Power" will be available from 12 June on position papers | Alterric www.alterric.com/politische-interessenvertretung/positionspapiere/