In yesterday’s cabinet meeting, the German Federal Government passed the 2027 EEG amendment (Renewable Energy Sources Act amendment) and the so-called grid connection package. In a position paper published on the matter, energy park operator Alterric criticizes the proposed regulations as a massive brake on the expansion of renewables. In the company’s view, the Federal Cabinet is risking the transformation and international competitiveness of German business and industry, which urgently depend on affordable and secure energy.
“In their current form, both initiatives push up the levelized cost of electricity and permanently weaken the competitiveness of our industry. Especially at a time when companies are already facing immense international competitive pressure, this sends a fatal signal. Instead of improving the framework for investments, the draft proposals create additional uncertainty and costs,” says Dr. Frank May, CEO of Alterric. “The process behind it is all the more incomprehensible: A three-day feedback period for two legislative projects of such far-reaching importance for the energy transition and Germany as a business location is simply unacceptable. Furthermore, the lack of grandfathering protection for long-made investments cannot remain as it is. Systemic changes of this magnitude require practical transition periods. The Bundestag is now called upon to thoroughly refine and correct these proposals during the parliamentary process.”
Grid connection package remains a brake on investment
Compared to previously leaked drafts, the Federal Government has made improvements: The designation period for so-called “capacity-constrained areas” was reduced from 10 to 6 years (with the option of a one-time 18-month extension). The triggering threshold increases from three to five percent, and the compensation-free volume is capped at 18 to 20 percent of annual electricity generation. However, these adjustments are far from sufficient to prevent the brake on renewable energy expansion.
Under European law, such an intervention should actually serve only as an emergency instrument. The values now established go far beyond this scope. If entire regions are classified as capacity-constrained across the board, this jeopardizes large-scale renewable expansion. Especially in combination with the planned “system-supportive grid connection capacity” (SAL), these interventions threaten to exacerbate one another. Furthermore, there is currently a complete lack of transparency regarding how many areas would actually be affected. A reliable impact assessment is virtually impossible, leading to substantial planning and investment uncertainty. Alterric therefore calls for a mandatory prior review of such area designations by the Federal Network Agency (Bundesnetzagentur).
Additional market and cost risks arise from the tight timeline for the “system-supportive grid connection capacity”. While the approach of a system-supportive design is fundamentally sensible, the planned entry into force on January 1, 2027, appears unrealistic. The date underestimates the immense technical retrofitting effort and ignores existing lead times at equipment manufacturers. Projects that are already far advanced are at risk of being jeopardized as a result.
By contrast, Alterric assesses the planned simplifications for co-location projects clearly positively. In the future, grid operators will no longer be allowed to reject such projects across the board due to a lack of grid capacity. However, for these projects to actually connect to the grid faster, digitalization among grid operators must also advance. So far, analog, non-transparent processes continue to hinder the connection of new plants.
EEG amendment: Defective market design and further market interventions via lease caps
Although Alterric welcomes that the Federal Government is addressing the industry’s demand and increasing the tender volume for onshore wind energy by 12 gigawatts, the draft EEG amendment approved by the cabinet falls short of expectations and even creates new hurdles for expansion.
For instance, with the introduction of two-sided Contracts for Difference (CfDs), the reform misses the opportunity to establish a modern market design. Without a so-called market value corridor, plant operators lack a reliable investment framework. A corridor would preserve market incentives while gradually transitioning the industry toward financing without state subsidies. Furthermore, a sustainable market design lacks reliable statutory backing for private power purchase agreements (PPAs).
The planned intervention in private lease agreements must be viewed with particular concern. The proposed cap on lease payments at 3.5 percent of plant revenues is out of touch with the market and regulatory policy. Competition has recently regulated lease prices effectively. Instead, government price intervention threatens to make land provision by landowners more difficult and further slow down capacity addition.
On a positive note, the planned further development of the reference yield model stands out. The proposed regional differentiation and the adjustment of the correction factor for southern Germany could make expansion in lower-yield regions more economically viable. However, for this provision to be effective, lawmakers must consider its interactions with other EEG and grid expansion regulations.
Appeal to Members and Parliamentary Groups in the Bundestag
Ahead of the start of parliamentary deliberations, Alterric urgently appeals to the parliamentary groups and members of the Bundestag to fundamentally overhaul the draft bill. Only then can the system-supportive expansion of renewables be driven forward, security of supply for German industry be ensured, and the economic viability of investments in all regions of Germany be guaranteed.