Germany's coalition aims to speed up distribution grid expansion

The parties in Germany’s governing coalition have agreed to draft a policy package to speed up the expansion of the electricity distribution grid, according to a joint statement. 

“Renewable energy sources and storage systems, industrial facilities, data centres, charging infrastructure, heat pumps – they all need to be connected to the electricity grid,” chancellor Friedrich Merz’s conservatives (CDU/CSU) and the Social Democrats (SPD) said. “It is therefore crucial to speed up the expansion of the distribution network in particular.” They promised to present a “distribution grid package” by the end of the year to speed up expansion, modernisation and digitalisation of the networks and improve financing. The aim is to halve the time it takes to complete grid projects, the parties said. 

Grid development has been a crucial hurdle for the energy transition, and the policy focus has often been on the high voltage transmission network. However, local and regional power lines that connect consumers to the system are increasingly taking the spotlight, as insufficient distribution grid capacity and faulty regulatory processes hold back the roll-out of renewable energy and storage projects across Germany and Europe.

Germany’s coalition government is currently discussing a law reform to better align new renewable power projects with the grid’s capacity to transport the electricity. An early draft proposed scaling back grid connection priority for new projects, for example by limiting curtailment compensation payments in areas experiencing grid bottlenecks, and partially allowing grid operators to charge renewable investors for grid upgrades. 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 – and ultimately risk slowing down the energy transition. The government is still negotiating the reform.

The European Commission recently proposed a "Grids Package", which includes reform proposals to speed up planning and permitting, boost investments, and ultimately support the electrification of sectors that currently rely on fossil fuels. Germany’s coalition said it wants to use the package to speed up permitting of grid projects, but the new rules have yet to be negotiated between the European Parliament and member state governments. 

The coalition also agreed to prepare the rollout of a stripped-down version of intelligent electricity meters for small-scale consumers – the “smart meter light”, a system with simpler data communication. Smart meters are devices that can record how much and when electricity is used and transmit this real-time data to the electricity provider and grid operator.

Germany has been especially slow in rolling out smart meters, due to regulatory caution, hardware bottlenecks and high costs. The technology allows customers to adapt their electricity demand to periods of high or low supply, and enables dynamic tariffs that reward households for shifting consumption to times when power is cheap and plentiful. More flexibility on the consumption side will be crucial as the share of renewables grows. As of December 2025, only 5.5 percent of customers in Germany were equipped with smart meters compared with 63 percent in the EU, said a recent EU report.