The management consultancy AXXCON recently published a study entitled ‘Will the energy transition fail at the last mile?’ A rather provocative title, so it’s time for ZfK to take a closer look at what the study’s findings are all about. Energy experts Maik Neubauer and Armin Schelian are both partners at AXXCON and responsible for the study.
Mr Schelian, Mr Neubauer, what exactly does the term “last mile” mean? Does it refer to distribution networks in general, or to smart technology? And why is the slow pace of transformation jeopardising the energy transition in Germany? So far, everything has gone well.
Armin Schelian: Yes, the last mile generally refers to distribution networks. The aim of our study was to examine the extent to which current distribution networks can continue to guarantee and ensure stability, scalability and security of supply in the future. The flexibility required in generation and among consumers – in the context of the heat transition and the increase in e-mobility, for example – poses very significant challenges. The risk of blackouts in the distribution network is currently manageable, but the slow pace of network modernisation is preventing the rapid integration of renewable energy sources, home energy systems and the rapid expansion of charging infrastructure, for example. This can currently be observed in many municipalities.
Your findings state that 44 percent of network technology dates back to the post-war period. From an IT security perspective, however, there is often talk of separating OT and IT technology and that it is beneficial for distribution networks not to be connected to the internet. Is it therefore preferable for network technology not to be so modern, as it cannot be hacked?
Maik Neubauer: There is certainly a risk of cyber attacks on distribution networks. However, these networks are definitely not a primary target for professionally planned disruptive activities. Of course, a copper network from the 1950s is not as vulnerable to cyber attacks as state-of-the-art, digitised distribution networks. However, their service life is finite, and modern network infrastructures based on intelligent networking of OT and IT architectures should take cyber security and data protection into account accordingly.
AI for grid control is currently only being considered by around one-fifth of companies, and there are hardly any concrete applications. How do you explain this reluctance? Could it possibly have something to do with security of supply and liability issues? And what applications would be suitable for AI?
Armin Schelian: Network control using intelligent algorithms is the future. In the medium term, it will no longer be realistic to control highly complex networks with many volatile feed-ins and off-takes using central control rooms and human operators. A high level of supply security and intelligent use of generation capacities at predictable costs can only work with learning AI systems. However, due to the still very limited data available, the application of AI in the network environment is still in its infancy. Without data, there can be no meaningful AI applications. However, data can only be collected with sufficiently digitised networks. So there is a ‘chicken and egg’ problem here.
Only about one third of network operators can finance the necessary investments from their own resources. Just under half of the companies are aware of the necessary investment requirements. Do we have a financing problem with the electricity grids? What are the consequences here?
Maik Neubauer: As confirmed by the study results, municipal utilities and distribution network operators will not be able to finance investments in network modernisation from their own reserves or generated profits. Other avenues must be explored in order to achieve this goal. Funding and expansion can be made possible through close cooperation, the raising of third-party funds, possible mergers, etc.
In addition to network expansion and digitisation, there are also high investments in the heating and mobility transition. No municipal utility will be able to shoulder the entire package on its own. Cities and municipalities, as shareholders and financing partners, must be involved at an early stage. Financing options are an integral part of the corporate strategy.
One in five respondents expects grid fees to increase by at least 40 percent by 2030. The government, on the other hand, wants to reduce electricity costs. How does that fit together?
Armin Schelian: Unfortunately, that doesn’t add up – at least not in the short term. Grid expansion and the intelligent use of new flexibilities will lead to better utilisation of the capacity generated from renewables in the medium to long term. But first, investments must be made – and this can be achieved in part through higher grid fees, which make up part of the electricity bill.
Alarming result: Medium-sized companies in particular express doubts about the feasibility of the electricity grid transformation. What are the reasons for this scepticism and what needs to change?
Maik Neubauer: The larger the distribution network, the higher the investments and capacities required for modern, digital infrastructure expansion. It is understandable that this could be difficult to achieve within the current timeframe for larger networks. Realistic timeframes are needed, as well as the financing and stable regulatory framework already mentioned, which do not constantly expand or adapt technical requirements or market roles.
General: What do distribution network operators need to do now to ensure that the energy transition in the distribution network is successful?
Armin Schelian: Before implementation, appropriate scenario planning is required, which includes both technical upgrades and conversions as well as financing issues. The legislature, in conjunction with the Federal Network Agency, must create a stable legal framework for this. In this context, energy associations are also called upon to demand appropriate guidelines and investment security. Without these framework conditions, we will not see an energy transition in the distribution network – i.e. in the last mile.
The interview was conducted by Stephanie Gust.
ZfK, 10.07.2025
