Germany plans to scale back renewable-energy subsidies as the country overhauls its funding system, seeking to reduce energy transition costs and address growing pressure on the electricity grid. The government is proposing to limit financial support for new solar and wind projects in areas where electricity networks are already congested. Germany’s renewable energy expansion, driven by subsidies, has outpaced grid development, creating challenges for electricity transmission and distribution. The government’s plans attempt to align renewable growth with available grid capacity and make its energy transition policy more affordable. Germans are paying extremely high prices for their energy policies, which are tied to net-zero and climate goals. The reforms are part of changes to the Renewable Energy Act (EEG) that must be enacted before the current support framework expires at the end of 2026.
Power lines in Germany have failed to keep pace with the growth in renewable energy, creating bottlenecks and forcing operators to temporarily curtail production. Under the plan, new renewable projects in areas with grid bottlenecks will receive automatic grid connections if they agree to give up compensation payments during periods when electricity cannot be delivered to the network. Under the redispatch rules, operators would have to forgo up to 20% of their feed-in payments if their installations are curtailed for up to 6 years. Curtailment will only occur when grid utilization reaches 5%.
The government also plans to reduce support payments for small rooftop solar systems starting next year. Operators of solar systems with up to 25 kilowatts of installed capacity built from 2027 would be guaranteed payment for up to 36 months. After this transition phase, they would have to switch to direct marketing, meaning they would need to sell their electricity on power exchanges via a service provider, where prices fluctuate.
More specifically, from 2027, new private and commercial solar systems with a capacity below 25 kilowatts will no longer receive the traditional 20-year guaranteed feed-in tariff. Instead, during a three-year transition period, payments would consist of a base rate of 6.2 cents per kilowatt-hour plus a direct-marketing bonus of 1.5 cents, which is capped at four years. The plan also limits rooftop solar feed-in to 50% of the system’s rated capacity. The goal is to reduce overcompensation and encourage self-consumption and battery storage. Analysts expect the profitability of small solar to become increasingly dependent on home batteries or electric-vehicle charging.
The government is expected to spend about €16 billion ($18.3 billion) on renewable subsidies this year, with additional payments for curtailed generation of up to €3 billion ($3.4 billion), despite spending cuts in other areas, such as health, that have drawn criticism from constituents.
Critics of the reduced subsidy plan for renewables say the changes could slow investment in onshore wind and solar projects, as revenues fall amid increasingly negative power prices. Despite the reduced subsidies, Germany has kept its target to raise the share of renewables in its electricity consumption to 80% by 2030, up from about 58%. It is also planning additional auctions for renewable capacity. Onshore wind tenders are set at 15,000 megawatts for both 2027 and 2028, then decline to 12,000 megawatts in 2029 and eventually to 10,000 megawatts each year from 2030 to 2032. For ground-mounted solar, the volume remains flat at 14,000 megawatts per year, while biogas will see 1,000 megawatts auctioned in 2027 and 2028.
According to a draft law published by Germany’s Economy Ministry, from 2027, new renewable generators should receive support ‘in a way that benefits both the market and the system,’ which means rewarding projects that respond more closely to electricity demand and do not worsen grid congestion.
The cabinet is set to agree on the reforms on July 29, and then the plan will be sent to parliament to become law.
Conclusion
Germany is reducing subsidies for its renewable energy industry as wind and solar growth has outpaced the growth of the electric grid, causing bottlenecks. Renewable operators could lose up to 20% of their feed-in payments if their output is curtailed. And beginning in 2027, the government will reduce support payments for small rooftop solar systems, those less than 25 kilowatts, for three years. The government’s plans attempt to align renewable growth with available grid capacity and make the energy transition more affordable. The reforms are part of changes to the Renewable Energy Act, which must be updated before the current support framework expires at the end of 2026. Germany, however, is not reexamining the policy of increasing reliance upon renewable energy despite growing concern about the deindustrialization of Europe’s strongest industrial power due to high energy costs.
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