The German Federal Ministry for Economic Affairs and Energy has detailed plans for comprehensive amendments to the Renewable Energy Sources Act (EEG), signaling significant changes to the nation's approach to promoting renewable energy. The objective of these reforms is to streamline costs associated with Germany's energy transition while altering the market dynamics for small and large electricity producers alike.

Shift from Feed-in Tariffs to Direct Marketing

The proposed legislation seeks to reduce state expenditure on renewable energy expansion by at least 20%. A key element is the transition from fixed feed-in tariffs for small photovoltaic (PV) systems to a system favoring direct marketing. Under direct marketing, compensation for electricity fed into the grid would be based on prevailing market prices rather than a guaranteed rate. The Ministry contends that small rooftop PV installations can now achieve profitability independently, especially when a high proportion of the generated electricity is used directly by owners.

While the details for smaller installations are yet to be finalized, the reform is set to prioritize larger, ground-mounted solar projects over smaller rooftop systems, which are considered less cost-effective for the energy transition. This shift could significantly reshape incentives for new PV investments by private individuals and small businesses.

Unified Support Rates and New Operational Requirements

Another aspect of the reform is the introduction of a standardized support rate for small and medium-sized PV installations. The primary goal is to promote grid stability. To achieve this, the Ministry is proposing that small PV systems limit their grid feed-in to a maximum of 50% of their capacity during midday hours. This measure is intended to encourage the installation of battery storage systems, which can facilitate increased self-consumption or delayed injection into the grid, thereby alleviating network congestion during peak times.

However, the Ministry has not yet clarified whether decentralized storage at individual installations offers greater benefits to the grid compared to larger, centralized storage solutions at key network nodes.

Priority Overhaul for Grid Connections

Significant changes are also planned for the approval and management of grid connections. Rather than continuing with the current first-come, first-served approach, the new system will assign priority based on project maturity and planning status. The reform introduces reservation fees and will require operators to provide more transparency about available capacity, reservations, and connection approvals.

Network operators will also be required to adhere to strict response deadlines and assign project priorities based on predefined criteria. The overall approach will be coordinated by transmission system operators to ensure a consistent national framework and to address cross-regional challenges.

New Rules on Curtailment and Compensation

Another significant element is the proposed handling of capacity constraints in the grid. Currently, operators receive compensation when their systems are curtailed due to network limitations. The Ministry aims to end these compensations by permitting network operators to formally designate overloaded sections as capacity-limited. In such cases, if generation is curtailed, no compensation would be provided. Additionally, the Federal Network Agency would oversee the introduction of regionally differentiated cost contributions for new grid connections.

Legislative Timeline and Outlook

The draft legal texts for the updated Renewable Energy Sources Act, set to be applicable from 2027, and the new grid connection regulations have not yet been published. Lawmakers are expected to engage in extensive debate, particularly with parliamentary opposition groups, as the reforms progress through the Bundestag.

These planned changes underscore the government's commitment to both fiscal responsibility and the acceleration of Germany's energy transition. However, they are likely to have substantial impacts on the economics and operational requirements for both small-scale and large-scale renewable energy producers.