Q&A: Will Germany’s upcoming electricity grid reform slow down the energy transition?

Germany’s economy ministry plans to change legislation that currently grants renewable power installations privileged access to the electricity grid. In a leaked internal proposal, seen by Clean Energy Wire (CLEW), the ministry details its plans to better align renewable power projects with the grid’s capacity to transport the electricity they produce. The draft proposed scaling back grid connection priority for new projects, limiting curtailment compensation payments in areas experiencing grid bottlenecks, and partially allowing grid operators to charge renewable investors for grid upgrades. 

Priority grid access for renewables is a pillar of the country’s central energy transition legislation, the Renewable Energy Act (EEG). It stipulates that grid operators must not only prioritise connection requests from renewable energy projects, but also guarantees remuneration for the electricity they feed into the grid. This provides investors with planning security and simplifies financing.

Privileged grid access is seen as a key driver of the progress in Germany’s expansion of renewables, which now cover nearly 60 percent of the country’s electricity demand. However, grids have not kept up with this expansion. Germany is also slow to tap into the potential of making demand more flexible to better align it with fluctuating wind and solar generation, which would ease the burden on the grid. 

The proposal is part of wider government plans to reform Germany’s renewable energy support framework, and follows a other efforts by the economy ministry to rein in the costs associated with the energy transition. Changes to the draft are still possible.

The leaked proposal is not linked to the European Grid Package, an initiative by the European Commission to speed up the expansion, modernisation and digitalisation of the member states’ grids.

Germany’s government aims to better align the expansion of wind and solar power installations, power storage, and large electricity consumers with the expansion of grids. 

“New power plants should be built where the electricity they generate can be transported and used,” an economy ministry spokesperson told CLEW. It was “no longer appropriate” to guarantee the purchase of electricity from new plants without taking into account the actual generation and grid structure at the local level, the spokesperson added. 

With its proposals, the economy ministry aims to set incentives so that more renewable electricity is used instead of curtailed. It aims to achieve this by coordinating renewables and grid expansion, arguing that, to date, there is no incentive to account for existing grid bottlenecks when deciding on a project’s location or scope. 

The ministry argued, therefore, that future wind and solar power projects should be built in areas where fewer grid reinforcements are necessary; that they add storage facilities on site to reduce bottlenecks; and that they “take responsibility” for the costs associated with necessary grid expansions – all of which would, in turn, bring electricity costs down for consumers. 

Additionally, it plans to enable grid operators to set criteria to prioritise or deprioritise connection requests, differentiating between speculative and serious projects, especially in relation to large-scale battery storage systems. Grid operators have received a “flood of applications” in recent years, with connection requests far surpassing Germany’s total electricity generation capacity – though many projects are speculative.

The expansion of renewables has made Germany’s electricity mix the “cleanest ever” and has significantly reduced greenhouse gas emissions.

In the leaked 36-page reform draft, dated January 2026, Germany’s economy ministry proposed: 

• A redispatch provision to better control the location of new renewable projects. In grid sections that operators designate as “capacity limited”, renewable power investors should carry the financial risks of potential curtailments themselves. Specifically, in “hotspots” where more than three percent of the previous year’s electricity generation could not be fed into the grid, renewable investors would only be granted immediate grid connection if they waive compensation for future curtailments for up to ten years. Grid operators are yet to designate these areas.
• Enabling grid operators to establish new procedures to handle connection requests, including from new battery storage projects, data centres, and industry. In areas where bottlenecks are likely, a connection might only be granted under a flexibility agreement.
• Enabling grid operators to pass on regionally differentiated construction fees to electricity production facilities. Involving new renewable projects in the costs of modernising and expanding grids should incentivise them to use scarce grid capacity efficiently, the ministry argued. The “construction levy” could apply to private rooftop photovoltaic modules as well. Grid regulator BNetzA would determine exact rules and locations.
• Digital grid connection processes – from application to commissioning – should be the standard by 2028.
• The obligation for grid operators to modernise and expand networks in line with rising electricity demand remains in place.

As the share of renewable energy sources in the electricity mix grows, Germany has to figure out how to bring integration costs down while maintaining strong investment incentives.

The legal framework supporting renewables dates back to a time when their contribution made little difference to the overall electricity system. On the path to a future where they play a central role, however, the system needs to adapt. This requires continued incentives for new renewable energy projects, but also parallel investments in transmission and distribution grids, storage, backup capacities, interconnectors, and measures to incentivise flexible electricity demand. The better these individual efforts are coordinated, the lower the required system development costs will be.

Meanwhile, the costs for grid congestion management, also known as redispatch measures, have reached three billion euros annually, according to the economy ministry. These measures involve deliberately reducing output at some renewable installations while deploying additional capacity in other regions, with curtailed renewables receiving compensation payments.

Power market analysts agree that more granular price signals at different times or locations are needed to better align renewable investment and generation with available grid capacity, supporting both reliability and affordability during the transition.

Political opponents and the Social Democrats, who are in a coalition with economy minister Katherina Reiche's conservative Christian Democrats (CDU), both criticised the leaked draft, arguing it risked slowing down the energy transition at a time when fossil fuel dependencies increasingly become a geopolitical liability. 

The renewables industry warned that the changes, especially the proposal to forgo compensation payments for curtailments, could impact the financial viability of many projects, making it much more difficult to assess their risk profile. Clean energy providers called the proposal an "attack on renewables", arguing that, to bring system costs down, the government should prioritise making the most of existing infrastructure, for example by introducing dynamic electricity tariffs.

It remains unclear to what extent the proposal would slow the energy transition, and whether it would really ensure that renewables are added more “efficiently”. If expansion drastically slowed because investors shun the added risks, energy transition progress could become jeopardised.  

An analysis by Aurora Energy Research found that areas where over three percent of renewable electricity had to be curtailed are currently relatively small. “It is therefore likely that the introduction of a redispatch provision for renewables based on this concept would not directly lead to a widespread loss of redispatch remuneration,” Aurora analyst Lukas Günner told CLEW. However, “the uncertainty this introduces regarding financial viability for projects all over Germany should not be underestimated,” he added.

Researchers eagerly await further details and, while they agree with some incentives, many point out that grid operators must continue to be encouraged to expand the grid in regions with scarce capacity. 

“It is crucial that the designation of ‘capacity-limited grid areas’ is dynamic, transparent and temporary, as the grid situation will change significantly in some cases in the coming years due to planned grid projects, substations and grid reinforcements,” said Martin Braun from the energy research institute Fraunhofer IEE.

Renewable projects could end up having to carry risks over which they have no direct influence, increasing generation costs – potentially well beyond the savings on the grid side, said Philipp Godron, an electricity policy specialist at think tank Agora Energiewende, in comments to CLEW. According to Godron, grid operators should provide far greater transparency to enable efficient regulation. This would provide much-needed information on grid capacity, connection requests, overload and future projections.

“The current proposal uses a hammer where a screwdriver is needed: A well-tailored solution should focus on areas with particularly heavy grid loads, rather than restricting large regions. Grid operators should be required to prioritise the expansion of network capacity in these areas. Moreover, existing instruments should be taken into account: There is already a well-established process for allocating suitable land for wind power, led by local and regional authorities and involving grid operators. Introducing a competing instrument would create uncertainties and may eventually put the wind expansion targets at risk.”

As a leaked draft law, the proposal could still face changes as deliberations continue. 

The economy ministry would present details of any legal changes to the public and consult on them “in due course”, a spokesperson told CLEW. 

Germany aims to bring the renewable share in power consumption to 80 percent by 2030 – a goal that chancellor Friedrich Merz’s coalition government has said it intends to stick to.