Paragraph 14c EnWG

§14c EnWG opens the door to market-based flexibility in the distribution grid for the first time. Grid operators can now resolve local congestion not just with infrastructure but with flexibility products. The key? Interoperable systems, reliable real-time and forecast data, and standardized interfaces connecting assets, platforms and grids – unlocking smarter, faster, more efficient energy management.

What does §14c of the Energy Industry Act specify?

§14c is part of the amendment of the Energy Industry Act (EnWG) and was incorporated into law in Germany in 2021. It has been in force since 2022, but it cannot yet be applied in practice because the Federal Network Agency (BNetzA) has not defined the required criteria for market-based flexibility products.

Nevertheless, §14c is more relevant than ever in the context of discussions and EU requirements on flexibility, grid congestion and congestion management, and it complements existing intervention instruments such as §14a and redispatch.

What is the objective of §14c

The goal of §14c is to create a legal framework for market-based procurement of flexibility services. This means that grid operators can no longer manage flexibility only through intervention but can also purchase it via the market. Grid operators can request offers from flexibility providers such as load adjustment, feed-in or storage, and select the best fit solution for them. This prioritizes the use of available flexibility to manage grid congestion more efficiently and reduce the need for costly grid expansions.

Contents of §14c

§14c includes regulations on the following:

Permission for market-based procurement
Grid operators are allowed to purchase flexibility services via market mechanisms instead of intervening directly. The goal is to improve congestion management in a cost-optimized way.

Requirements for transparency and non-discrimination
The procurement processes for flexibility must be open, transparent and non-discriminatory. This means that all potential service providers must have the same opportunities to participate in the procurement process and no group of providers may be advantaged or disadvantaged. Grid operators publish their criteria, timeframes, activation rules and compensation models, so that all providers have equal information for participation.

Approval of standardized market products
The Federal Network Agency (BNetzA) reviews and defines uniform product definitions for flexibility services, such as technical specifications, activation rules and billing modalities. However, the BNetzA has not yet established such criteria, meaning that grid operators can currently procure flexibility only voluntarily or test it in pilot projects.

Activation of the obligation
The obligation for market-based procurement only applies after the approval or definition of market products by the Federal Network Agency. As mentioned, these criteria still need to be established.

Adoption, entry into force and regulatory framework of §14c

Introduction and legislative adoption

§14c was incorporated into the EnWG in 2021 and came into force in July 2022 as part of the law amending energy legislation under the Climate Protection Immediate Program. Since its implementation, its operational effectiveness depends on the specifications issued by the Federal Network Agency (BNetzA).

Relevant framework conditions

The implementation of §14c follows EU Directive 2019/944, which establishes a general European framework for an integrated, flexible and consumer-oriented electricity market. In the future, flexibility is intended to resolve grid congestion more efficiently and complement grid expansion. However, the necessary criteria are currently lacking. Once these are established, §14c will also become operational.

Functioning of §14c

§14c defines a market-based procurement of flexibility services. This means that grid operators procure the required flexibility via market processes instead of intervening directly. Flexibility includes adjustments of loads, feed-in or storage to stabilize the grid. Providers can (in theory) report their available flexibility, and grid operators then define requirements, timeframes and prices. The selection of services is carried out transparently based on cost-effectiveness. Subsequently, the flexibility is activated, remunerated and documented. Typical market participants include battery storage systems, photovoltaic (PV) plants, heat pumps and charging infrastructure via aggregators and platform providers.

The benefits are clear: flexibility services are cheaper than grid expansion. In addition, the systematic use of distributed energy resources (DER) is promoted.

Exemption rules

Exceptions are possible if market-based procurement is not economical. The regulatory authority can then exempt certain flexibility products to avoid inefficient market outcomes or the amplification of congestion.

Why §14c is Becoming Important

Grid load is increasing due to the ongoing electrification of heating, mobility and industry as well as the growing number of controllable consumers and producers. As a result, local grid congestion is expected to rise and the need for flexible, data-driven solutions in congestion management grows. §14c is the central mechanism for introducing local flexibility markets and is intended to manage congestion more efficiently, transparently and cost-effectively than purely technical measures.

Grid operators and market participants are therefore preparing strategically for future flexibility markets. The development of the necessary technical, digital and organizational infrastructure is becoming increasingly crucial. This includes data models, forecasts, control platforms, metering and communication systems, as well as tools for assessing and activating decentralized flexibility.

Requirements for technical and organizational systems

For market-based procurement of flexibility, grid operators and asset operators need an interoperable, secure and reliable technical infrastructure. This includes metering, control and communication systems capable of transmitting power adjustments precisely. Smart meter gateways, certified control units and unified communication protocols form the foundation for efficiently activating flexibility in the low-voltage grid. At the same time, data must be validated in real time and usable for forecasting purposes so that activations can be assessed reliably and economically.

Another central aspect is proof of delivery. Providers must be able to document which flexibility was provided and when. Standardized data models and interfaces ensure that grid operators can trace activations and remunerate them correctly. Technical and organizational uniformity is crucial for integrating heterogeneous assets easily.

Role of energy management and flexibility platforms

Energy management and flexibility platforms such as XENON will play a central role in the future, as they:

• Provide controllability, measurability and forecasting quality for decentralized assets
• Enable aggregation of heterogeneous small-scale assets
  
  
• Automate activation and verification processes
• Simplify participation of households and businesses in flexibility markets

With a steadily growing number of heat pumps, charging points, storage systems and rooftop PV installations, holistic energy management solutions form the operational basis for making the §14c mechanisms (intended in theory) practically usable in the low-voltage grid.

Challenges

The development of market-based flexibility processes under §14c is still at an early stage. Binding product standards, activation logics and minimum technical requirements from the Federal Network Agency are still missing. As long as these foundations are not defined, market participants cannot align their systems accordingly and grid operators cannot establish binding procurement processes.

The economic framework conditions are still unclear. In particular, there are open questions concerning billing, remuneration and the accounting treatment of activated flexibility. Without clear rules, uncertainty arises in the planning and assessment of flexibility offerings.

From a technical perspective, there is significant heterogeneity between assets, control components and data sources. Different standards, proprietary systems and variable data quality hinder interoperability and scaling. In addition, extensive coordination between grid operators, platform providers and other market partners is necessary to create consistent processes and interfaces.

What opportunities are there with §14c?

§14c offers the possibility to systematically leverage decentralized flexibility, reduce congestion costs and accelerate the integration of renewable energy.

For households and businesses, a market environment is emerging for the first time in which controllable loads and storage become economically relevant and automated energy management systems can unlock new use cases for asset operators.

Market-based mechanisms allow flexibility to be provided more economically than through purely technical interventions. Local markets enable transparent assessment and selection of flexibility offerings and can mitigate grid congestion cost efficiently. Digitalization creates additional potential. Platforms can bundle, activate and verify flexibility and thereby simplify participation in future flexibility markets. In this way, flexibility becomes an integrated part of low-voltage grid operation.

Difference between §14a, §14c EnWG and Redispatch

§14a EnWG allows grid operators to access certain controllable consumption devices such as heat pumps or charging points, but within a mandatory mechanism. §14c EnWG, on the other hand, relies on a market-based approach and primarily addresses local congestion in the distribution grid. Market participants voluntarily decide whether they want to offer flexibility.

Redispatch regulates interventions in generation assets and storage to prevent overarching and supraregional congestion in the distribution and transmission grid.

All instruments can be used in a complementary way and will in the future be integrated into a combined congestion management framework.

Expert insights on §14a and future outlook

The transition to market-based flexibility requires technical preparation and clearly defined processes. Digital platforms, interoperable interfaces and automated forecasting and activation logics will be essential to make flexibility reliably usable in the low-voltage grid. Organizations benefit when they embed data quality, controllability and verification processes in their systems at an early stage and test initial use cases. Carsten Schäfer, Senior Product Manager Platform at gridX, explains: “The development of local flexibility markets will progress step by step. Those who invest early in interoperable infrastructure and automated processes can make flexibility scalable and unlock new value creation potential.”

In the coming years, the importance of decentralized flexibility will continue to grow. Once the Federal Network Agency defines standardized products, a binding framework for market-based procurement will emerge. Digital energy management and flexibility platforms will then play a central role, as they enable the technical integration, aggregation and activation of decentralized resources.

In the meantime, §14c is expected to merge with §14a and redispatch into an integrated congestion management framework. The low-voltage grid will become the most important area for new flexibility markets, and the ability to securely control and settle decentralized assets will become a key competitive advantage.