German govt’s energy transition cost saving efforts lack systemic perspective – renewables industry

Germany's push to cut costs from renewable energy curtailment risks making the broader energy transition more expensive, the Renewable Energy Federation of North Rhine-Westphalia (LEE NRW) said. The government's focus on reducing so-called redispatch costs – compensation paid when grid bottlenecks force grid operators to curtail electricity – ignores other, often more long-term system costs, such as those from importing fossil fuels, the lobby group said.

Germany’s energy transition – the transition to a climate-neutral and nuclear-free energy system – requires massive expansion of renewables. Spearheaded by economy minister Katherina Reiche, the government has put a focus on reducing energy transition costs, which it plans to cut by reducing support payments for renewable energy operators and limiting renewable energy expansion in areas where grid capacity is limited. To replace coal-fired plants and provide sufficient backup capacity for the electricity system, it also plans to install more than 10 gigawatts of new gas-fired power plant capacity. 

The government is relying on fossil power plants without considering the costs this causes, while also focusing narrowly on redispatch costs, said LEE NRW head Hans-Josef Vogel. “If you only look at individual cost factors, there is a risk that you make the whole system more expensive,” Vogel argued. “It’s not about gigawatts or the amount of curtailed electricity, but the macroeconomic total costs of a new power system.” 

Looking primarily at redispatch as a lever for reducing costs would put too much of a focus on short-term savings, LEE NRW said. Slowing down renewables expansion could reduce the total volume of curtailed electricity but also shift costs to imported fuels if it goes too far, said Vogel. “More natural gas and in future also imported hydrogen are not a strategy for permanently reducing costs.” Reducing the expansion of new wind and solar power capacity would therefore increase system costs and uncertainty in the long run, he argued. 

An analysis by research institute EWI, commissioned by LEE NRW, found that system costs could be reduced by about 70 billion euros by 2045 compared to existing regulations, for example by slowing renewables expansion initially but reaching long-term capacity targets; focussing on ground-mounted over rooftop solar facilities, and onshore over offshore wind power. 

LEE NRW said that the government’s current plans carried the risk of slowing renewables expansion too much. While it makes sense to primarily build capacity in regions where there is already sufficient grid capacity, it is equally important to ensure grid expansion is sped up in regions with a higher risk of congestion, the organisation added. Without faster grid expansion across the board, the economic viability of many renewable energy projects would become more uncertain for the operators due to factors beyond their control, LEE NRW said. This would primarily affect citizen energy projects and small commercial operators and push these important grassroots projects out of the market.

LEE NRW said the EWI analysis’s results mirrored those of the government’s own 2025 energy transition monitoring report, which had also concluded that optimising systemic effects is decisive for making the energy transition more cost efficient. LEE NRW said the government needs to readjust key aspects of its grid package and also the upcoming reform of the Renewable Energy Act (EEG) to reduce system costs, especially with respect to the expected surge in electricity demand due to the sustained rollout of electric cars, heat pumps and other green technologies.